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<CONFORMED-NAME>JACLYN INC
<CIK>0000052969
<ASSIGNED-SIC>3100
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<FISCAL-YEAR-END>0630
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<STREET1>635 59TH STREET
<CITY>WEST NEW YORK
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<FILENAME>jaclyn_k05.txt
<DESCRIPTION>FORM 10-K
<TEXT>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              --------------------

                                    FORM 10-K

[X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2005

                                       OR

[ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________.


                           Commission File No. 1-5863


                                  JACLYN, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                Delaware                                  22-1432053
-------------------------------------------    ---------------------------------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)


      635 59th Street, West New York, New Jersey              07093
      ------------------------------------------            ---------
       (Address of principal executive offices)             (Zip Code)


      Registrant's telephone number, including area code:  (201) 868-9400


      Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of each exchange
              Title of Class                        on which registered
        --------------------------                 -----------------------

        Common Stock, $1 par value                 American Stock Exchange


      Securities registered pursuant to Section 12(g) of the Act:   None
<PAGE>

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting common equity (based on the closing
price of such stock on the American Stock Exchange) held by non-affiliates of
the Registrant as of the last business day of the Company's most recently
completed second fiscal quarter (December 31, 2004) was approximately
$20,159,000.

There were 2,474,057 shares of Common Stock outstanding at September 15, 2005.


                       DOCUMENTS INCORPORATED BY REFERENCE

Certain Portions of the Registrant's Proxy Statement for the Registrant's Annual
Meeting of Stockholders scheduled to be held on November 30, 2005 are
incorporated by reference into Part III of this Form 10-K.
<PAGE>

                                TABLE OF CONTENTS

          Item                                                              Page
          ----                                                              ----

PART I     1.   Business.................................................    1

           2.   Properties...............................................    5

           3.   Legal Proceedings........................................    5

           4.   Submission of Matters to a Vote of Security Holders......    5

PART II    5.   Market for Registrant's Common Equity, Related
                Stockholder Matters and Issuer Purchases of Equity
                Securities...............................................    6

           6.   Selected Financial Data..................................    9

           7.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations......................    10

           7A.  Quantitative and Qualitative Disclosures About
                Market Risk..............................................    17

           8.   Financial Statements and Supplementary Data..............    17

           9.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure......................    18

           9A.  Controls and Procedures..................................    18

           9B.  Other Information........................................    18

PART III   10.  Directors and Executive Officers of the Registrant.......    18

           11.  Executive Compensation...................................    18

           12.  Security Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters...............    18

           13.  Certain Relationships and Related Transactions...........    18

           14.  Principal Accountant Fees and Services...................    19

           15.  Exhibits and Financial Statement Schedule................    19
<PAGE>

                           Forward-Looking Statements
                           --------------------------

         This Form 10-K contains certain forward-looking statements concerning,
among other things, our anticipated results, and future plans and objectives
that are or may be considered to be "forward-looking statements." Our ability to
do this has been fostered by the Private Securities Litigation Reform Act of
1995 which provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information so long as those statements are
accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those discussed. These
forward-looking statements are subject to a number of known and unknown risks
and uncertainties that could cause our actual results, performance or
achievements to differ materially from those described or implied in the
forward-looking statements, including, but not limited to, general economic and
business conditions, including the impact on consumer spending as a result of a
slower consumer economy, competition in the accessories and apparel markets,
potential changes in customer spending, acceptance of our product offerings and
designs, a highly promotional retail environment, any significant variations
between actual amounts and the amounts estimated for those matters identified as
our critical accounting estimates, as well as other significant accounting
estimates made in the preparation of our financial statements, and the impact of
the hostilities in the Middle East and the possibility of hostilities in other
geographic areas as well as other geopolitical concerns. Additional uncertainty
exists for the potential negative impact that a recurrence of Severe Acute
Respiratory Syndrome (SARS) in the Far East and other foreign countries in which
we source our products may have on our business. In light of the uncertainty
inherent in our forward-looking statements, you should not consider their
inclusion to be a representation that such forward-looking matters will be
achieved. We assume no obligation for updating any such forward-looking
statements, whether as a result of new information, future events, or otherwise.
In evaluating forward-looking statements, you should consider all these risks
and uncertainties, together with any other risks described in our other reports
and documents furnished or filed with the Securities and Exchange Commission,
and you should not place undue reliance on those statements.


                                     PART I

Item 1.     Business.

          Jaclyn, Inc., which was incorporated in the State of Delaware in 1968,
and its subsidiaries (collectively, "Jaclyn", "the Company", "we", "us", "our",
or "the Registrant") are primarily engaged in the design, manufacture,
distribution and sale of women's and children's apparel, and vinyl, leather and
fabric handbags, sport bags, backpacks, cosmetic bags, and related products
(collectively, "handbag products"). Our apparel lines are wide ranging and
include women's loungewear, sleepwear, dresses and sportswear, and lingerie, as
well as infants' and children's clothing. We market our handbag products in a
variety of popularly priced fashions and designs, with an emphasis on casual,
travel and sport styles.

         Styling is an important factor in the merchandising of all of our
products. Our staff of full-time designers study fashion trends in order to
anticipate consumer demand. The design staff works
<PAGE>

closely with the purchasing department to determine concepts and fabrics for
apparel products, as well as the styling and material components for handbag
products. The design staff also works with the production and engineering staffs
to determine the costs of production and the technical problems involved in
producing a new style. We change most of our designs from season to season.

         We have no manufacturing facilities, either in Hong Kong or elsewhere.
All of our products are manufactured by outside contractors. Finished
merchandise is received at independently owned outside warehouses, and/or at
facilities we own or lease, in New Jersey, Florida, California and Indiana. From
these locations, products are shipped under different selling names to customers
all over the country. Products for the apparel catalogue business are shipped
from outside contractor locations directly to the customer. In addition, certain
handbag products manufactured in the Far East are shipped directly to customers
from Hong Kong. We market our handbag products primarily through general
merchandise, retail chain stores and department stores. We market our apparel
lines to department stores, retail chain stores, major mail order catalogs and
other specialty retailers. We sell our products throughout the United States
using both our own salespersons and independent sales representatives.

         We manufacture and market apparel products under the trade names
"Topsville", "I. Appel", "Smart Time", and "Emerson Road", each of which we own.
We also manufacture apparel items for sale as private-label merchandise. In
addition, we are licensed to manufacture and market apparel products under the
names "Jordache(TM)" under an agreement which expires December 31, 2005,
"Charles Goodnight(TM)" and Chuckie Goodnight(TM)" under an agreement which
expires May 31, 2006,"Vanity Fair(TM)" under an agreement expiring December 31,
2006, "Seventeen" and "CosmoGirl" under an agreement which expires April 30,
2008, and children's apparel based on the "Messages from the Heart" collection
under an agreement which expires June 30, 2008. We market our handbag products
under trademarks and trade names which we own, including "Shane" and "Aetna,"
"Susan Gail," and "Robyn Lyn". We consider our owned and licensed trademarks and
trade names, as well as our other, related intellectual property rights, to be
of significant value in the marketing of our products.

         Sales of apparel items during each of the fiscal years ended June 30,
2005, 2004 and 2003 represented 70%, 77%, and 76%, respectively, of consolidated
net sales. Sales of handbag products represented the remainder of our
consolidated net sales. We customarily offer our customers credit terms. We do
not have long-term contracts with any of our customers.

         In fiscal 2005, our imports of apparel and handbag products accounted
for approximately 100% of consolidated net sales, compared to approximately 96%
of consolidated net sales in fiscal 2004 and 92% in fiscal 2003. Generally,
imports offer us the benefit of diversification of styling and the benefit of
cost savings related to such purchases. While our operations are subject to the
usual risks associated with purchases from foreign countries, our other foreign
and domestic manufacturing sources provide us with alternative sources and
facilities.

         Our international operations consist of small offices in Hong Kong, and
Shanghai and Dong

                                       2
<PAGE>

Guan, China. During fiscal 2005, we opened the Dong Guan, China office, in part
to better serve one of our major customers, and we moved to this office the
services previously provided by an office we maintained in Taiwan. Personnel in
our foreign offices coordinate and track orders for products, invoice certain
shipments and conduct inspections of the factories of outside contractors in the
Far East who manufacture our products. We do not believe, however, that our
international operations are material to our business.

         Approximately 67% of the Company's consolidated net sales for fiscal
2005 were to general merchandise, chain, department stores and catalogue
retailers, with the balance consisting of sales to smaller specialty shops,
smaller retail stores and cosmetic firms. During the fiscal year ended June 30,
2005, three customers of the Company contributed approximately 71% of
consolidated net sales as follows: Wal-Mart Stores, Inc., 44%; Estee Lauder, 19%
, and Kohl's Corporation, 8%. During the fiscal year ended June 30, 2004,
Wal-Mart Stores, Inc., Kohl's Corporation, and Estee Lauder accounted for
approximately 41%, 14% and 13%, respectively, of our consolidated net sales, and
during the fiscal year ended June 30, 2003, Wal-Mart Stores, Inc., Estee Lauder,
and Kohl's Corporation accounted for approximately 36%, 12% and 8% of
consolidated net sales, respectively. We believe that the loss of any one of
these customers would have a material adverse effect on our results of
operations.

         Purchases of apparel and handbag raw materials, primarily fabrics, trim
and other materials, and certain finished products, are made from a variety of
sources. In most cases, we work with our suppliers and contractors in the design
and style of the materials we purchase. Our largest expenditures for raw
materials are for fabrics, leather, vinyl and urethane plastics, which we
purchase from several suppliers, one of which provided about 5% of our raw
material needs in fiscal 2005. While we have no long-term supply contracts, as
the raw materials we use are available from various sources, we anticipate no
difficulty in the future in obtaining raw materials necessary for our business.
We deal with a number of sources for our purchases of finished apparel, handbags
and related products, no one of which accounted for more than approximately 12%
of total cost of goods sold during fiscal 2005. We have no long-term supply
contracts with our Far East or European sources of finished handbags and related
products or apparel items and we are subject to the usual risks associated with
that.

         We offer Fall/Winter, Holiday and Spring/Summer product lines and, in
almost all instances, manufacture products to meet the specific requirements of
our customers. Our business is somewhat seasonal in nature and is influenced by
a number of other factors, including general economic conditions. Accordingly,
we do not believe that quarterly net sales are necessarily indicative of future
trends. Nevertheless, we anticipate that during fiscal 2006 we again will have
more sales volume and earnings in the first-half of the fiscal year than in the
second half. Reference is made to Note L, "Unaudited Quarterly Financial Data,"
of the Notes to Consolidated Financial Statements on page F-25 of this Form 10-K
for additional information about historical quarterly results.

         At September 15, 2005, unfilled orders were approximately $58,000,000
compared to

                                       3
<PAGE>

approximately $65,600,000 at September 15, 2004. At that date, there was an
increase in open orders in our infants' and children's apparel business as well
as in the handbag business, offset by a decrease in backlog relating to our the
Women's sleepwear business, our premium business and our catalogue business. In
the ordinary course of business, the dollar amount of unfilled orders at a
particular point in time is affected by factors, including scheduling of the
manufacture and shipping of goods (which, in turn, may be dependent on the
requirements of customers). Accordingly, a comparison of backlog from period to
period is not necessarily meaningful and may not be indicative of future sales
patterns or shipments.

         At June 30, 2005, we employed 172 persons, of whom 114 were salaried
employees and the balance were paid on an hourly basis. At June 30, 2005, 9 of
our employees were members of the Four Joint Boards of New York, New Jersey,
Pennsylvania and New England, affiliated with the International Leather Goods,
Plastics and Novelty Workers Union, AFL-CIO. We consider relations with our
employees to be satisfactory.

         We compete with numerous domestic and foreign manufacturers of apparel
and handbags, very few of which are believed to account for as much as 1% of
industry sales, and we believe our sales of apparel items and handbag products
are not significant in light of total apparel and handbag industry sales. Our
business is dependent, among other things, on our ability to anticipate and
respond to changing consumer preferences, to remain competitive in price, style
and quality, and to meet our customers' various production and delivery
requirements. While some competitors may be larger or may have greater resources
than ours, we believe that our size and financial position will allow us to
continue to respond to changes in consumer demand and remain competitive.

         Recent Developments

         On September 7, 2005, we publicly announced that we granted to an
unrelated third party an option relating to the sale of the Company's executive
offices and warehouse facility, as well as two adjacent lots, located in West
New York, New Jersey. As noted below in "Item 2. Properties" of this Form 10-K,
we currently use approximately one-half of the 140,000 square foot West New York
facility (the remainder having been leased to third parties), and we have been
looking at opportunities to move to a space more suitable for our present and
future needs.

         The proposed purchase price is $10,000,000, the substantial portion of
which is payable at closing. The option contract provides the optionee an
initial 90-day diligence period, during which time the optionee has the absolute
right not to proceed with the proposed transaction, as well as up to an
additional 11 months to obtain approval from all applicable governmental
authorities for the use of the property as residential housing. Under certain
circumstances, we also have the right to decide not to proceed with the proposed
transaction. The proposed transaction is also subject to a number of
contingencies and conditions, including the governmental approvals mentioned
above, the optionee's receipt of a mortgage commitment, the completion of
environmental testing and compliance, and other contingencies and conditions.

                                       4
<PAGE>

         The option contract also permits us and our tenants to remain in the
West New York facility for up to five months after any closing. We also
announced that if the proposed transaction is consummated, we anticipate we
would move to another site in the vicinity of our present location.

         We note that we have entered into an option contract only, and there is
no assurance that a sale of the property will be concluded.

Item 2.     Properties.

         We own a 140,000 square foot facility in West New York, New Jersey, in
which our executive offices and one of our warehouse facilities is located. We
currently lease approximately 70,000 square feet of this West New York facility
to outside parties. This rental income is used to defray a portion of the
operating cost of the building and, as such, is included as an offset to those
expenses in our shipping, selling and administrative expenses. Reference is made
to the information set forth above in "Item 1. Business" of this Form 10-K under
the caption "Recent Developments" for information concerning our grant of an
option to an unrelated third party to purchase the West New York facility.

         We also lease five showroom and office facilities in New York City
totaling approximately 32,000 square feet, as well as a shipping facility in
Medley, Florida for our Topsville operations with approximately 35,000 square
feet of warehouse and office space. Reference is made to Note D, "Commitments
and Contingencies," of the Notes to Consolidated Financial Statements on page
F-14 of this Form 10-K for additional information about our commitments under
the terms of non-cancelable leases.

         In addition, and as noted in "Item 1. Business" above, our
international operations consist of three small, leased offices in Hong Kong,
and Shanghai and Don Guan, China aggregating approximately 10,000 square feet.

Item 3.     Legal Proceedings.

         (a)   We are not a party to, nor is any of our property the subject of,
any material pending legal proceeding.

         (b)   No material pending legal proceeding was terminated during the
three-month period ended June 30, 2005.

Item 4.     Submission of Matters to a Vote of Security Holders.

         None

                                       5
<PAGE>

Executive Officers of the Registrant

         Our executive officers are listed below. All executive officers are
elected at the annual meeting or at interim meetings of the Board of Directors
and hold their offices, at the pleasure of the Board of Directors, until the
next annual meeting of the Board and the election and qualification of their
respective successors. No arrangement or understanding exists between any
executive officer and any other person pursuant to which the executive officer
was elected.

        Name                          Age       Position and Period Served
        ----                          ---       --------------------------

        Abe                           88        Chairman of the Executive
        Ginsburg..................              Committee for more than the past
                                                five years

        Allan                         63        Chairman of the Board for more
        Ginsburg..................              than the past five years

        Robert                        57        President and Chief Executive
        Chestnov..................              Officer for more than the past
                                                five years

        Howard                        63        Vice Chairman of the Board and
        Ginsburg..................              President of the Company's Shane
                                                Handbag Division for more than
                                                the past five years

        Anthony                       60        Chief Financial Officer for more
        Christon..................              than the past five years


                                     PART II
                                     -------


Item 5.     Market for the Registrant's Common Equity, Related Stockholder
            Matters and Issuer Purchases of Equity Securities.

         The Company's Common Stock, $1.00 par value per share, is traded on the
American Stock Exchange (Symbol: "JLN"). The following table sets forth the high
and low closing sales prices for our Common Stock, as reported by the American
Stock Exchange, for each quarterly period during our fiscal years ended June 30,
2005 and 2004.

                                       6
<PAGE>

                  Fiscal Year Ended June 30, 2005        High           Low
                  -------------------------------        ----           ---

                  First Quarter                         $6.15          $5.00
                  Second Quarter                         8.47           5.90
                  Third Quarter                          8.30           4.01
                  Fourth Quarter                         6.60           3.88

                  Fiscal Year Ended June 30, 2004        High           Low
                  -------------------------------        ----           ---

                  First Quarter                         $4.30          $2.50
                  Second Quarter                         5.15           4.15
                  Third Quarter                          5.02           4.60
                  Fourth Quarter                         5.40           4.70


         We did not pay cash dividends during fiscal 2005 or 2004 and do not
anticipate paying cash dividends in the foreseeable future.

         At June 30, 2005, there were approximately 501 holders of record of our
Common Stock.

                                       7
<PAGE>

                      Issuer Purchases of Equity Securities

         The following table provides certain information as to repurchases of
shares of our Common Stock during the three months ended June 30, 2005:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                 (c) Total Number           (d) Maximum Number
                         (a) Total                             of Shares (of Units)       (or Approximate Dollar
                         Number of               (b)             Purchased as Part         Value) of Shares (of
                         Shares (or            Average             of Publicly            Units) that May Yet Be
                          Units)             Price Paid          Announced Plans           Purchased Under the
      Period            Purchased(2)          per Share          or Programs (1)            Plans or Programs
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>                     <C>                      <C>
  April 1, 2005-               --                  --                   --                       105,217
  April 30, 2005
--------------------------------------------------------------------------------------------------------------------
   May 1, 2005-            15,988               $5.68                   --                       105,217
   May 31, 2005
--------------------------------------------------------------------------------------------------------------------
   June 1, 2005-           35,292               $6.22                   --                       105,217
   June 30, 2005
--------------------------------------------------------------------------------------------------------------------
      Total                51,280               $6.05                   --                       105,217
--------------------------------------------------------------------------------------------------------------------
</TABLE>

-------------------
(1) On December 3, 2002, we publicly announced that the Board of Directors
authorized the repurchase of up to 350,000 shares of Common Stock, and that
repurchases would be made from time to time in the open market and/or through
privately negotiated transactions, subject to general market and other
conditions. Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and to Notes I and K of the Notes
to Consolidated Financial Statements on pages F-21 and F-25 of this Form 10-K
for additional information about repurchases of shares of Common Stock.
(2) All shares repurchased during the quarter were shares distributed to
non-management participants in the Jaclyn, Inc. Employees Stock Ownership Plan
upon termination of that plan, which were repurchased in private transactions by
us as an accommodation to those participants.

                                       8
<PAGE>

Item 6.     Selected Financial Data.

                    We have derived the selected financial data presented below
from our audited consolidated financial statements for the Fiscal Years ended
June 30, 2005, 2004, 2003, 2002, and 2001. The selected financial information
presented below should be read in conjunction with such consolidated financial
statements and notes thereto.

<TABLE>
<CAPTION>
        Years ended June 30,                  2005             2004             2003             2002             2001
--------------------------------------   -------------    -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>              <C>
Net Sales                                $ 126,477,000    $ 123,850,000    $ 108,960,000    $  81,031,000    $  79,570,000
Cost of Goods Sold - see Note 1             97,952,000       92,658,000       83,506,000       62,083,000       61,575,000
                                         -------------    -------------    -------------    -------------    -------------
Gross Profit                                28,525,000       31,192,000       25,454,000       18,948,000       17,995,000
                                         -------------    -------------    -------------    -------------    -------------
Shipping, selling and administrative        26,172,000       27,979,000       23,620,000       19,812,000       17,714,000
expenses - see Note 1 and Note 2
Interest expense                               639,000          574,000          546,000          293,000          234,000
Interest income                                 (1,000)          (3,000)          (5,000)          (3,000)        (109,000)
Provision (benefit) for income taxes           666,000        1,184,000          610,000         (415,000)          56,000
                                         -------------    -------------    -------------    -------------    -------------

NET EARNINGS (LOSS) - see Note 1         $   1,049,000    $   1,458,000    $     683,000    $    (739,000)   $     100,000
                                         -------------    -------------    -------------    -------------    -------------
Weighted average shares - Basic              2,596,000        2,531,000        2,521,000        2,561,000        2,644,000
Net earnings (loss) per common share -
Basic                                    $         .40    $         .58    $         .27    $        (.29)   $         .04
                                         -------------    -------------    -------------    -------------    -------------
Weighted average shares - Diluted            2,702,000        2,687,000        2,547,000        2,561,000        2,644,000
Net earnings (loss) per common share -
Diluted                                  $         .39    $         .54    $         .27    $        (.29)   $         .04
                                         -------------    -------------    -------------    -------------    -------------
TOTAL ASSETS                             $  32,492,000    $  34,489,000    $  33,005,000    $  35,418,000    $  25,031,000
                                         -------------    -------------    -------------    -------------    -------------
Mortgage Payable - Long-Term portion     $   2,727,000    $   2,880,000    $   3,023,000    $      61,000    $     100,000
Stockholders' equity                     $  16,674,000    $  17,276,000    $  16,220,000    $  15,824,000    $  16,563,000
                                         =============    =============    =============    =============    =============
</TABLE>

    ----------------
    Note 1:    Fiscal 2002 includes a pre-tax charge relating to the Topsville,
               Inc. acquisition, totaling $1,289,000 ($825,000 after tax), of
               which $389,000 is included in Cost of Goods Sold for an
               adjustment to inventory based upon the assessed fair value, and
               $900,000 included in Shipping, Selling and Administrative
               Expenses, for the amortization of open order backlog.

    Note 2:    Fiscal 2001 includes goodwill amortization of $112,000.

                                       9
<PAGE>

Item 7.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations.

Overview

         We are engaged in the design, manufacture, distribution and sale of
women's and children's apparel, and vinyl, leather and fabric handbags, sport
bags, backpacks, cosmetic bags, and related products. Our apparel lines include
women's loungewear, sleepwear, dresses and sportswear, and lingerie, as well as
infants' and children's clothing. Our products are mostly made to order, and we
market and sell our products to a range of retailers, including general
merchandise stores, retail chain stores, department stores, cosmetic companies,
major mail order catalogs and other specialty retailers.

         Our business is subject to seasonal variations. Historically, we have
realized a significant portion of net sales during the first and second fiscal
quarters, during which time our customers generally increase inventory levels in
anticipation of both back-to-school and holiday sales. That trend has continued
during fiscal 2005. We believe this seasonality is consistent with the general
pattern associated with sales to the retail industry and we expect this pattern
to continue. Our quarterly results of operations may also fluctuate
significantly as a result of a number of other factors, including the timing of
shipments to customers and general economic conditions. Accordingly, comparisons
between quarters may not necessarily be meaningful, and the results for any one
quarter are not necessarily indicative of future quarterly results or of
full-year performance.

Critical Accounting Policies and Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires the appropriate application of
accounting policies, many of which require us to make estimates and assumptions
about future events and their impact on amounts reported in our consolidated
financial statements and related notes. Since future events and their impact
cannot be determined with certainty, the actual results will inevitably differ
from its estimates. Such differences could be material to the consolidated
financial statements.

         We believe that application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are periodically reevaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, we have found the application
of accounting policies to be appropriate, and actual results have not differed
materially from those determined using necessary estimates.

         Our accounting policies are more fully described in Note A to the
consolidated financial statements. We have identified certain critical
accounting policies that are described below.

         Merchandise inventory. Our merchandise inventory is carried at the
lower of cost (on a first-in, first-out basis) or market. We write down our
inventory for estimated obsolescence or unmarketable inventory based upon
assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

                                       10
<PAGE>

         Allowance for doubtful accounts. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments, and we also maintain accounts receivable insurance on
certain of our customers. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

         Market development accruals. We estimate reductions to revenue for
customer programs and incentive offerings, including special pricing agreements,
price protection, promotions and other volume-based incentives. If market
conditions were to decline, we may take actions to increase customer incentive
offerings possibly resulting in an incremental reduction of revenue at the time
the incentive is offered. We review and refine these estimates on a quarterly
basis based on current experience, trends and our customers performance.

         Goodwill. We evaluate goodwill annually or whenever events and changes
in circumstances suggest that the carrying amount may not be recoverable from
estimated future cash flows. In making this assessment, we rely on a number of
factors including operating results, business plans, economic considerations,
anticipated future cash flows and marketplace data. A change in these underlying
assumptions may cause a change in the results of the tests and, as such, could
cause fair value to be less than the carrying value. In such event, we would
then be required to record a charge which would impact earnings.

         Income taxes. Income taxes are accounted for under Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
In accordance with SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences in the
financial statement carrying amount of existing assets and liabilities and their
respective tax bases, as measured by enacted tax rates that are expected to be
in effect in the periods when the deferred tax assets and liabilities are
expected to be settled or realized. Significant judgement is required in
determining the provisions for income taxes.

         We establish the provisions based upon management's assessment of
exposure associated with permanent tax differences, tax credits and interest
expense applied to temporary difference adjustments. The tax provisions are
analyzed periodically (at least annually) and adjustments are made as events
occur that warrant adjustments to those provisions.

         Discount rate. The discount rate that the Company utilizes for
determining future pension obligations is based on the Moody's AA corporate bond
index. The indices selected reflect the weighted average remaining period of
benefit payments. The discount rate had decreased to 4.7% as of June 30, 2005
from 5.50% as of June 30, 2004. A further 50 basis point change in the discount
rate would generate an experience gain or loss of approximately $130,000.

Liquidity and Capital Resources

         The net increase in cash and cash equivalents for the fiscal year ended
June 30, 2005 of

                                       11
<PAGE>

$267,000 was the result of funds provided by financing activities totaling
$1,303,000, offset by funds used in investing activities of $449,000, and by
funds used in operating activities totaling $587,000. Net cash used in operating
activities resulted primarily from a decrease in accounts payable and other
current liabilities of $4,040,000 (mostly attributable to lower inventory
levels) and an increase in accounts receivable totaling $1,793,000 (due to
higher May and June net sales in fiscal 2005 compared to the same two-month
period in fiscal 2004), not fully offset by net earnings of $1,049,000 and a
decrease in inventory levels totaling $4,189,000, reflecting both higher fourth
quarter sales in fiscal 2005 compared to the prior comparable period as well as
lower projected first quarter net sales for fiscal 2006 versus first quarter
2005 net sales. Cash used in investing activities totaling $449,000 was for
purchases of property and equipment. Funds provided by financing activities
were, for the most part, related to net bank borrowing totaling $1,540,000, plus
the exercise of stock options totaling $314,000, partially offset by the
repurchase of the Company's common stock under the Company's stock repurchase
program totaling $408,000 and payment on our outstanding mortgage of $143,000.

         In May 2005, the Company amended its bank credit facility. The amended
facility, which expires December 1, 2007, continues to provide for short-term
loans and the issuance of letters of credit in an aggregate amount not to exceed
$40,000,000. Based on a borrowing formula, the Company may borrow up to
$25,000,000 in short-term loans and up to $40,000,000 including letters of
credit. The borrowing formula allows for an additional amount of borrowing
during the Company's peak borrowing season from June to October. Substantially
all of the Company's assets are pledged to the bank as collateral (except for
the West New York, New Jersey facility, which has been separately mortgaged as
noted below). The line of credit requires that the Company maintain a minimum
tangible net worth, as defined, and effective June 30, 2005, imposes certain
debt to equity ratio requirements. The Company was in compliance with all
applicable financial covenants as of June 30, 2005. As of June 30, 2005,
borrowing on the short-term line of credit was $5,760,000, and the Company had
$13,960,000 of additional availability (based on the borrowing formula) under
its credit facility. At June 30, 2005, the Company was contingently obligated on
open letters of credit with an aggregate face amount of approximately
$14,591,000. Borrowing during the year was at the bank's prime rate or below, at
the option of the Company. The bank's prime rate at June 30, 2005 was 6.25%.

         During fiscal 2005, the average amount outstanding under the short-term
line was $8,503,000 with a weighted average interest rate of 5.22%. During 2004,
the average amount outstanding under the short-term line was $8,221,000 with a
weighted average interest rate of 3.89%. The maximum amount outstanding during
fiscal 2005 and fiscal 2004 was $23,380,000 and $22,000,000, respectively.

         In August 2002, the Company consummated a mortgage loan in the amount
of $3,250,000. The financing is secured by a mortgage of the Company's West New
York, New Jersey headquarters and warehouse facility (see the information under
the caption "Item 2. Properties"). The mortgage loan bears interest at a fixed
rate of 7% per annum. The financing has a fifteen-year term, but is callable by
the bank lender at any time after September 1, 2007 and may be prepaid by the
Company, along with a prepayment fee, from time to time during the term of the
financing. At June 30, 2005, the outstanding balance of the mortgage loan was
$2,880,000.

                                       12
<PAGE>

         The Company believes that funds provided by operations, existing
working capital, and the Company's bank line of credit will be sufficient to
meet foreseeable working capital needs. Reference is made to Note E, "Credit
Facilities," of the Notes to Consolidated Financial Statements on page F-16 of
this Form 10-K for additional information about the Company's credit lines.

         There were no material commitments for capital expenditures at June 30,
2005.

         The Company previously announced that the Board of Directors authorized
the repurchase by the Company of up to 350,000 shares of the Company's Common
Stock. Purchases may be made from time to time in the open market and through
privately negotiated transactions, subject to general market and other
conditions. The Company intends to finance these repurchases from cash flow from
operating activities and/or from its bank credit facility. As of June 30, 2005,
the Company purchased 244,783 shares of its Common Stock at a cost of
approximately $1,011,000.

         As of June 30, 2005, 2004 and 2003, working capital was $13,286,000,
$13,615,000, and $12,755,000, respectively. The ratios of current assets to
current liabilities on those same dates were 2.0 to 1, 2.0 to 1, and 1.9 to 1,
respectively. The Company's cash and cash equivalents totaled $893,000,
$626,000, and $66,000, at June 30, 2005, 2004 and 2003, respectively.

Contractual Obligations and Commercial Commitments

         To facilitate an understanding of our contractual obligations and
commercial commitments, the following data is provided:

<TABLE>
<CAPTION>
                                                          Payments Due by Period
                                                          ----------------------

----------------------------------------------------------------------------------------------------------
                                                  Less than          2-3            4-5           After
 Contractual Obligations (1)           Total        1 Year          Years          Years         5 years
----------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>            <C>
Notes Payable                     $  5,760,000   $  5,760,000   $         --   $         --   $         --
----------------------------------------------------------------------------------------------------------
Mortgage Payable                     2,880,000        153,000        340,000        392,000   $  1,995,000
----------------------------------------------------------------------------------------------------------
Royalties                              632,000        240,000        392,000             --             --
----------------------------------------------------------------------------------------------------------
Operating Leases (2)                 2,615,000        999,000      1,260,000        356,000             --
----------------------------------------------------------------------------------------------------------
Total Contractual Obligations     $ 11,887,000   $  7,152,000   $  1,992,000   $    748,000   $  1,995,000
----------------------------------------------------------------------------------------------------------

<CAPTION>

                                                  Amount of Commitment Expiration Per Period
                                                  ------------------------------------------

----------------------------------------------------------------------------------------------------------

                                      Total
            Other                    Amounts        Within           2-3            4-5          After
   Commercial Commitments           Committed       1 Year          Years          Years        5 Years
----------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>            <C>
Letters of Credit                 $ 14,591,000   $ 14,591,000   $         --   $         --   $         --
----------------------------------------------------------------------------------------------------------
Total Other
Commercial Commitments            $ 14,591,000   $ 14,591,000   $         --   $         --   $         --
----------------------------------------------------------------------------------------------------------
</TABLE>

                                       13
<PAGE>

-----------------------
(1)  We enter into arrangements with vendors to purchase merchandise up to three
months in advance of expected delivery. These purchase orders do not contain any
significant termination payments or other penalties if cancelled.

(2)  Our rent expense under operating leases provides for escalation clauses and
other lease concessions, as applicable, in each lease. The minimum lease
payments are recognized on a straight-line basis over the term of each
individual underlying lease.

         The Company expects to contribute $775,000 to its defined benefit
pension plan during the fiscal year ending June 30, 2006.

Off-Balance Sheet Arrangements

         We have not created, and we are not a party to, any special-purpose or
off-balance sheet entities for the purpose of raising capital, incurring debt or
operating our business. We do not have any arrangements or relationships with
entities that are not consolidated into the financial statements that are
reasonably likely to materially affect our liquidity or availability of capital
resources.

Results of Operations

2005 Compared to 2004

         Net sales for fiscal 2005 totaled $126,477,000, an increase of
$2,627,000, or 2.1%, compared to the prior fiscal year. The increase reflected
significantly higher handbag net sales, not fully offset by lower apparel net
sales. Sales by category were as follows:

         Net sales for the Apparel category in fiscal 2005 were $87,716,000, a
decrease of $7,374,000, or 7.8% from the prior fiscal year. The decrease in net
sales was primarily due to the elimination of several private label programs
from one of the women's sleepwear division's customers, and a 41.1% reduction in
net sales in our catalogue business due to the loss of one of that business'
significant customers who will be sourcing goods directly.

         Net sales for the Handbags category in fiscal 2005 were $38,761,000, or
34.8% higher than the prior fiscal year's total of $28,760,000. The sales
increase is mostly attributable to increased sales for the premium business
reflecting continued growth with its most significant customer, and somewhat
higher net sales in our other handbag division.

         Gross margins were 22.6% in fiscal 2005 compared to 25.2% in 2004. The
decrease in gross margins is mostly a function of much lower handbag margins
this fiscal year. Gross margins by category were as follows:

         Gross margin for the Apparel category in 2005 decreased to 25.6%
compared to 26.6% in 2004. This 1.0 percentage point decrease was primarily
attributable to much lower gross margins in the children's apparel business, due
to required higher customer allowances in the current fiscal

                                       14
<PAGE>

year versus fiscal 2004, not fully offset by higher women's sleepwear business
gross margins.

         Gross margin for the Handbags category in 2005 decreased to 15.7%
compared to 20.4%. This decrease was mainly due to much lower competitive
margins in our premium business. The much lower gross margin in the premium
business, for the most part, reflects marketplace competition resulting in the
Company reducing its gross profit margin in order to maintain sales. In
addition, we experienced lower handbag business margins due to reduced sales of
licensed products (which normally carry a higher margin), in the current fiscal
year compared to fiscal 2004.

         Shipping, selling and administrative expenses decreased by $1,807,000
in fiscal 2005 to $26,172,000. As a percentage of net sales, shipping, selling
and administrative expenses declined to 20.7% from 22.6% in fiscal 2004. The
principal factors attributable to the decrease are lower selling expenses (a
decrease of approximately $700,000), reflecting lower selling commissions
attributable to sales mix, lower royalty expense relating to the reduced sale of
licensed products (approximately $550,000), and lower general and administrative
expense in fiscal 2005 (about $700,000), mostly due to the approximately
$500,000 fiscal 2004 charge for the union pension withdrawal liability, offset
somewhat by higher product development expense (about $160,000) in fiscal 2005
for the children's apparel business associated with anticipated higher volume in
fiscal 2006.

         Interest expense was $639,000, an increase of $65,000 from the last
fiscal year, primarily the result of higher interest rates in the current fiscal
year compared to fiscal 2004.

         Net earnings of $1,049,000 for the fiscal year ended June 30, 2005
compared to $1,458,000 in the prior fiscal year. This year's lower net earnings
were primarily due to lower gross margin dollars and higher interest costs, not
fully offset by lower shipping, selling and administrative expenses, as
discussed above, as well as a lower effective tax rate in the current fiscal
year (primarily attributable to the recovery of a valuation allowance associated
with foreign tax credits), compared to fiscal 2004.

         2004 Compared to 2003

         Net sales for fiscal 2004 totaled $123,850,000, an increase of
$14,890,000, or 13.7%, compared to the prior fiscal year. Sales by category were
as follows:

         Net sales for the Apparel category in fiscal 2004 were $95,090,000, an
increase of $12,475,000, or 15.1%, compared to fiscal 2003. The sales increase
for this category was primarily due to an $18,700,000 increase in net sales from
the women's sleepwear business, which resulted mostly from increased orders from
one customer based on prior season sell-through of both private label and
licensed product. This significant increase was offset, in part, by an almost
$4,900,000 decrease in the catalog business reflecting continued lower demand
for mail-order apparel. The remainder of the offset is attributable to lower
children's apparel sales reflecting a lower level of reorders from one of our
customers.

         Net sales for the Handbags category were $28,760,000 for the year ended
June 30, 2004, an increase of $2,415,000, or about 9% above the same period in
the prior year, reflecting a $2,983,000

                                       15
<PAGE>

increase in the premium business the result of increased orders by one of its
significant customers, offset by a $568,000 decrease in our handbag business,
where licensed products were in less demand.

         Overall gross margins were 25.2% in 2004 compared to 23.4% in the prior
fiscal year.

         Gross margins by category were as follows:

         Gross margin for the Apparel category in 2004 improved to 26.6% from
23.9% in the prior fiscal year. The 2.7 percentage point increase was primarily
attributable to higher margins contributed by the children's apparel business
due to a favorable product mix, offset by lower margins in the women's sleepwear
business attributable to increased cotton and other raw material prices in the
Far East, as well as an increase in the level of shipments to discounters during
this period.

         Gross margin for the Handbags category decreased to 20.4% in 2004
compared to 21.8% in the similar prior year. A lower gross margin in the handbag
business, for the most part, reflects marketplace competition on several
programs causing this division to reduce its gross profit margin to an
acceptable level in order to maintain sales. The overall decrease was not
completely offset by slightly higher gross profit margins in the premium
business.

         Shipping, selling and administrative expenses increased by $4,359,000
in fiscal 2004 to $27,979,000 (22.6% of net sales). The prior fiscal year
totaled $23,620,000 (21.7% of net sales). The increase was mainly due to
volume/mix related expenses in fiscal 2004 compared to the prior fiscal year. A
significant part of the increase related to higher selling commissions as a
result of changes in sales mix (an increase of $1,370,000), product development
(an increase of $991,000), higher royalty expense (an increase of $904,000)
relating to additional licensed product sales, an increase relating to a charge
for a union pension withdrawal liability (an increase of $500,000), and higher
business and employee health care insurance premiums totaling approximately
$65,000. Reference is made to Note I, "Employees' Benefit Plans," of the Notes
to Consolidated Financial Statements on page F-21 of this Form 10-K for
additional information about the increase in the reserve for the union pension
withdrawal liability.

         Interest expense was $574,000, an increase of $28,000 from the last
fiscal year, reflecting an increased level of borrowing needed to finance the
increased volume of business in the current fiscal year compared to fiscal 2003.
The slight increase was offset somewhat by an approximately one-half percent
lower average interest rate in fiscal 2004 compared with the prior year.

         Net earnings of $1,458,000 for the fiscal year ended June 30, 2004
compared to net earnings of $683,000 in the prior year. This year's higher net
earnings were primarily due to higher net sales and gross margins, not
completely offset by higher shipping, selling and administrative expenses, and
higher interest expense, as discussed above.

                                       16
<PAGE>

Recent Accounting Pronouncements

         In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123R, "Share-Based Payment", which is an amendment to FASB
Statement No. 123, "Accounting for Stock-Based Compensation." Statement 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair
values, and would be effective for interim or annual reporting periods beginning
after June 15, 2005. We do not expect that the impact of SFAS No. 123R will be
material to the consolidated financial statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

         In the normal course of doing business, we are exposed to interest rate
change market risk. Since our borrowing patterns are cyclical, we are not
dependent on borrowing throughout the year. Nevertheless, a sudden increase in
interest rates (which under our bank line of credit is at the prime rate or at
LIBOR plus 200 basis points) may, especially during peak borrowing, potentially
have a significant negative impact on our results of operations. We estimate
that a 100 basis point fluctuation in applicable market interest rates would
increase or decrease interest expense by approximately $80,000, based on fiscal
2005 borrowing levels.

         We have not used, and currently do not anticipate using, any derivative
financial instruments. In addition, we have not been materially impacted by
fluctuations in foreign currency exchange rates as substantially all of our
business is transacted in, and is expected to continue to be transacted in, U.S.
dollar-based currencies.

Item 8.     Financial Statements and Supplementary Data.

         Financial Statements
         --------------------

         The report dated September 27, 2005 of Deloitte & Touche LLP, an
independent registered public accounting firm, on the consolidated balance
sheets of Jaclyn, Inc. and subsidiaries as of June 30, 2005 and 2004 and the
related consolidated statements of earnings, stockholders' equity and
comprehensive earnings (loss), and cash flows for each of the three fiscal years
in the period ended June 30, 2005, and Notes to Consolidated Financial
Statements appear on pages F-2 through F-26 of this Form 10-K.

         Supplementary Data
         ------------------

         Selected unaudited quarterly financial data for the fiscal years ended
June 30, 2005 and June 30, 2004 is set forth at Note L, "Unaudited Quarterly
Financial Data" on page F-25 of this Form 10-K.

                                       17
<PAGE>

Item 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure.

         Not Applicable.

Item 9A.    Controls and Procedures.

         At the end of the period covered by this report, we carried out an
evaluation, with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, we concluded that
the our disclosure controls and procedures were effective. There was no change
in our internal control over financial reporting during the quarter ended June
30, 2005 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

Item 9B.    Other Information.
            -----------------

         Not Applicable.


                                    PART III
                                    --------

Item 10.    Directors and Executive Officers of the Registrant.
            --------------------------------------------------

         The information required by this item (other than certain information
as to our executive officers, which information is set forth after Part I of
this Form 10-K under the caption "Executive Officers of the Registrant") is
incorporated herein by reference to our definitive Proxy Statement relating to
the 2005 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended.

Item 11.    Executive Compensation.
            ----------------------

         The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2005 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.

Item 12.    Security Ownership of Certain Beneficial Owners and Management.
            --------------------------------------------------------------

         The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2005 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.

Item 13.    Certain Relationships and Related Transactions.
            ----------------------------------------------

                                       18
<PAGE>

             The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2005 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.

Item 14.    Principal Accountant Fees and Services.
            --------------------------------------

             The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2005 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.

                                     PART IV
                                     -------

Item 15.    Exhibits and Financial Statement Schedule.
            -----------------------------------------

(a)      The following financial statements, financial statement schedule and
exhibits are filed as part of this report:

(1)      Financial Statements:
         --------------------

         Report of Independent Registered Public Accounting Firm

         Consolidated Balance Sheets -- June 30, 2005 and 2004

         Consolidated Statements of Earnings -- for the years ended June 30,
         2005, 2004 and 2003 Consolidated Statements of Cash Flows -- for the
         years ended June 30, 2005, 2004 and 2003

         Consolidated Statements of Stockholders' Equity and Comprehensive
         Earnings (Loss)-- for the years ended June 30, 2005, 2004 and 2003

         Notes to Consolidated Financial Statements

(2)      Financial Statement Schedule:
         ----------------------------

         Schedule II - Valuation and Qualifying Accounts

         All other schedules are omitted because they are either inapplicable,
         not required, or because the required information is included in the
         consolidated financial statements or notes thereto.

(b)      Exhibits:
         --------

Exhibit No.          Description
-----------          -----------

                                       19
<PAGE>

    3(a)             Certificate of Incorporation of the Registrant.

    3(b)             By-Laws of the Registrant (incorporated herein by reference
                     to Exhibit 3(b) to the Registrant's Annual Report on Form
                     10-K, File No. 1-5863, for the fiscal year ended June 30,
                     1991).

    4(a)             Promissory Note of the Registrant dated August 14, 2002
                     payable to the order of Hudson United Bank ("HUB") in the
                     principal amount of $3,250,000 (incorporated herein by
                     reference to Exhibit 4(a) to the Registrant's Annual Report
                     on Form 10-K, File No. 1-5863, for the fiscal year ended
                     June 30, 2002).

    4(b)             Mortgage, Security Agreement and Financing Statement dated
                     August 14, 2002 between the Registrant and HUB
                     (incorporated herein by reference to Exhibit 4(b) to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 2002).

    4(c)             Revolving Loan Agreement dated December 23, 2002 between
                     the Registrant and HUB (incorporated herein by reference to
                     Exhibit 4(c) to the Registrant's Annual Report on Form
                     10-K, File No. 1-5863, for the fiscal year ended June 30,
                     2003).

    4(d)             First Amendment to Revolving Loan Agreement, Promissory
                     Note and Other Loan Documents dated October 23, 2003
                     between the Registrant and HUB.

    4(e)             Second Amendment to Revolving Loan Agreement, Promissory
                     Note and Other Loan Documents dated October 23, 2003
                     between the Registrant and HUB (incorporated herein by
                     reference to Exhibit 4(a) to the Registrant's Quarterly
                     Report on Form 10-Q, File No. 1-5863, for the fiscal
                     quarter ended March 31, 2005).

    10(a)            1984 Employee Stock Option Plan of the Registrant
                     (incorporated herein by reference to Exhibit 10(f) to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 1989).*

    10(b)            1990 Stock Option Plan of the Registrant, as amended
                     (incorporated herein by reference to Exhibit 10(g) to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 1991).*

    10(c)            Second Amended and Restated Stockholders' Agreement dated
                     May 12, 2003 among the Registrant and the persons listed on
                     Schedule A thereto (incorporated herein by reference to
                     Exhibit U to Amendment No. 9 to the

                                       20
<PAGE>

                     Schedule 13D dated May 15, 2003 of Allan Ginsburg, Robert
                     Chestnov, Abe Ginsburg and Howard Ginsburg.).

    10(d)            Key Executive Disability Plan of the Registrant
                     (incorporated herein by reference to Exhibit 10(m) to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 1988).*

    10(e)            1996 Non-Employee Director Stock Option Plan (incorporated
                     by reference to Exhibit 10(o) to the Registrant's Annual
                     Report on Form 10-K, File No. 1-5863, for the fiscal year
                     ended June 30, 1998).*

    10(f)            Letter Agreement dated as of December 29, 1997 between the
                     Registrant and Robert Chestnov (incorporated herein by
                     reference to Exhibit 2.1 to the Registrant's Current Report
                     on Form 8-K, file No. 1-5863, for the fiscal year ended
                     June 30, 1998).*

    10(g)            Purchase and Sale Agreement dated January 11, 1999 between
                     Banner Industries of New York, Inc. and Jaclyn,
                     Inc.(incorporated herein by reference to Exhibit 2.1 to the
                     Registrant's Current Report on Form 8-K, file No. 1-5863,
                     dated January 26, 1999).

    10(h)            Purchase and Sale Agreement dated January 10, 2002 between
                     Mark Nitzberg and the Registrant (incorporated herein by
                     reference to Exhibit 2.1 to the Registrant's Current Report
                     on Form 8-K, File No. 1-5863, dated January 24, 2002).

    10(i)            Consulting Agreement dated January 10, 2002 between
                     Natoosh, LLC, Mark Nitzberg and the Registrant
                     (incorporated herein by reference to Exhibit 2.2 to the
                     Registrant's Current Report on Form 8-K, File No. 1-5863,
                     dated January 24, 2002).

    10(j)            Amendment to Consulting Agreement dated December 15, 2003
                     between Natoosh, LLC, Mark Nitzberg and the Registrant
                     (incorporated herein by reference to Exhibit Annual Report
                     on Form 10-K, File No. 1-5863, for the fiscal year ended
                     June 30, 2004).

    10(k)            Payment and Indemnification Agreement dated January 10,
                     2002 by and among Capital Factors, Inc., Topsville, Inc.,
                     Mark Nitzberg and the Registrant (incorporated herein by
                     reference to Exhibit 2.3 to the Registrant's Current Report
                     on Form 8-K, File No. 1-5863, dated January 24, 2002).

    10(l)            Consent and Joinder Agreement dated August 10, 2004 among
                     the Registrant, Mark Nitzberg and the persons listed on
                     Schedule A thereto (incorporated herein by reference to
                     Exhibit U to Amendment No. 12 to the

                                       21
<PAGE>

                     Schedule 13D dated August 16, 2004 of Allan Ginsburg,
                     Robert Chestnov, Abe Ginsburg and Howard Ginsburg.).

    14               Code of Ethics for Finance Professionals of the Registrant
                     (incorporated herein by reference to Exhibit 14 to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 2004).

    21               Subsidiaries of the Registrant.

    31(a)            Rule 13a-14(a) Certification of Robert Chestnov, President
                     and Chief Executive Officer of the Company.

    31(b)            Rule 13a-14(a) Certification of Anthony Christon, Principal
                     Financial Officer of the Company.

    32               Certification Pursuant to 18 U.S.C. Section 1350, as
                     Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
                     of 2002.

    99(a)            Code of Business Conduct and Ethics of the Registrant
                     (incorporated herein by reference to Exhibit 99(a) to the
                     Registrant's Annual Report on Form 10-K, File No. 1-5863,
                     for the fiscal year ended June 30, 2004).

    --------------------
    *Management contract or compensatory plan or arrangement

(c)  Financial Statement Schedules.
     -----------------------------

     Financial Statement Schedules are listed in response to Item 14(a)(2).

                                       22
<PAGE>

                                   SIGNATURES
                                   ----------

                    Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.


                                        JACLYN, INC.

                                        By: /s/ ALLAN GINSBURG
September 27, 2005                          ----------------------------------
                                            Allan Ginsburg, Chairman
                                            of the Board

                    Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:

/s/ ALLAN GINSBURG               Chairman of the Board        September 27, 2005
--------------------------       and Director
ALLAN GINSBURG

/s/ ROBERT CHESTNOV              President, Principal         September 27, 2005
--------------------------       Executive Officer and
ROBERT CHESTNOV                  Director

/s/ ANTHONY CHRISTON             Chief Financial Officer,     September 27, 2005
--------------------------       Principal Financial and
ANTHONY CHRISTON                 Accounting Officer

/s/ ABE GINSBURG                 Director                     September 27, 2005
--------------------------
ABE GINSBURG

/s/ HOWARD GINSBURG              Director                     September 27, 2005
--------------------------
HOWARD GINSBURG

/s/ NORMAN AXELROD               Director                     September 27, 2005
--------------------------
NORMAN AXELROD

/s/ MARTIN BRODY                 Director                     September 27, 2005
--------------------------
MARTIN BRODY

/s/ RICHARD CHESTNOV             Director                     September 27, 2005
--------------------------
RICHARD CHESTNOV
                                       23
<PAGE>

/s/ ALBERT SAFER                 Director                     September 27, 2005
--------------------------
ALBERT SAFER

/s/ HAROLD SCHECHTER             Director                     September 27, 2005
--------------------------
HAROLD SCHECHTER

                                       24
<PAGE>

JACLYN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
                                                                     PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              F-1
FINANCIAL STATEMENTS:
    CONSOLIDATED BALANCE SHEETS - AS OF JUNE 30, 2005 AND 2004       F-2
    CONSOLIDATED STATEMENTS OF EARNINGS - FOR THE YEARS
    ENDED JUNE 30, 2005, 2004 AND 2003                               F-3
    CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE YEARS
    ENDED JUNE 30, 2005, 2004 AND 2003                               F-4 TO F-5
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
       COMPREHENSIVE EARNINGS (LOSS)- FOR THE YEARS ENDED
       JUNE 30, 2005, 2004 AND 2003                                  F-6
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                       F-7 TO F-25
FINANCIAL STATEMENT SCHEDULE:
    VALUATION AND QUALIFYING ACCOUNTS                                F-26

                                       25
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of
Jaclyn, Inc.
West New York, New Jersey


         We have audited the accompanying consolidated balance sheets of Jaclyn,
Inc. and subsidiaries as of June 30, 2005 and 2004, and the related consolidated
statements of earnings, stockholders' equity and comprehensive earnings (loss)
and cash flows for each of the three fiscal years in the period ended June 30,
2005. Our audits also included the consolidated financial statement schedule
listed in the Index at Item 15(a)(2). These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

         We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Jaclyn, Inc. and
subsidiaries as of June 30, 2005 and 2004, and the results of their operations
and their cash flows for each of the three fiscal years in the period ended June
30, 2005, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

Deloitte & Touche LLP
New York, New York

September 27, 2005

                                      F-1
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>
ASSETS                                                                       2005            2004
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS                                                $    893,000    $    626,000
ACCOUNTS RECEIVABLE, LESS SALES RETURNS, SALES
DISCOUNTS, SALES ALLOWANCE, & ALLOWANCE FOR DOUBTFUL
ACCOUNTS: 2005: $3,388,000; 2004: $2,561,000                               19,740,000      17,894,000
INVENTORIES                                                                 3,688,000       7,877,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS                                   1,263,000         629,000
DEFERRED INCOME TAXES                                                         793,000         907,000
                                                                         ------------    ------------
TOTAL CURRENT ASSETS                                                       26,377,000      27,933,000
                                                                         ------------    ------------
PROPERTY, PLANT AND EQUIPMENT - NET                                         1,148,000       1,069,000
GOODWILL                                                                    3,338,000       3,338,000
OTHER ASSETS                                                                  137,000       1,645,000
DEFERRED INCOME TAXES                                                       1,492,000         504,000
                                                                         ------------    ------------
                                                                         $ 32,492,000    $ 34,489,000
                                                                         ------------    ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK                                                     $  5,760,000    $  4,220,000
ACCOUNTS PAYABLE                                                            2,302,000       6,373,000
COMMISSIONS PAYABLE                                                           932,000         666,000
ACCRUED PAYROLL AND RELATED EXPENSES                                        2,644,000       1,490,000
OTHER CURRENT LIABILITIES                                                   1,300,000       1,426,000
MORTGAGE PAYABLE - CURRENT PORTION                                            153,000         143,000
                                                                         ------------    ------------
TOTAL CURRENT LIABILITIES                                                  13,091,000      14,318,000
                                                                         ------------    ------------
MORTGAGE PAYABLE                                                            2,727,000       2,880,000
                                                                         ------------    ------------
DEFERRED INCOME TAXES                                                              --          15,000
                                                                         ------------    ------------
COMMITMENTS AND CONTINGENCIES - NOTE D
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $1: AUTHORIZED, 1,000,000 SHARES; ISSUED
AND OUTSTANDING, NONE
COMMON STOCK, PAR VALUE $1: AUTHORIZED, 5,000,000 SHARES; ISSUED
2005 AND 2004: 3,368,733 SHARES; OUTSTANDING 2005 2,574,676 AND 2004
2,475,879 SHARES                                                            3,369,000       3,369,000
ADDITIONAL PAID-IN CAPITAL                                                  9,670,000      10,390,000
RETAINED EARNINGS                                                          10,765,000       9,716,000
ACCUMULATED COMPREHENSIVE LOSS                                             (1,653,000)             --
                                                                         ------------    ------------
                                                                           22,151,000      23,475,000
LESS:  TREASURY STOCK AT COST (2005: 794,057 AND 2004: 892,854 SHARES)      5,477,000       6,199,000
                                                                         ------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                                 16,674,000      17,276,000
                                                                         ------------    ------------
                                                                         $ 32,492,000    $ 34,489,000
                                                                         ------------    ------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-2
<PAGE>

JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                               2005             2004             2003
                                                          -------------    -------------    -------------
<S>                                                       <C>              <C>              <C>
Net sales                                                 $ 126,477,000    $ 123,850,000    $ 108,960,000
Cost of goods sold                                           97,952,000       92,658,000       83,506,000
                                                          -------------    -------------    -------------
Gross profit                                                 28,525,000       31,192,000       25,454,000
                                                          -------------    -------------    -------------
Shipping, selling and administrative expenses                26,172,000       27,979,000       23,620,000
Interest expense                                                639,000          574,000          546,000
Interest income                                                  (1,000)          (3,000)          (5,000)
                                                          -------------    -------------    -------------
EARNINGS BEFORE PROVISION FOR INCOME TAXES                    1,715,000        2,642,000        1,293,000
PROVISION FOR INCOME TAXES                                      666,000        1,184,000          610,000
                                                          -------------    -------------    -------------
                                                          $   1,049,000    $   1,458,000    $     683,000
                                                          -------------    -------------    -------------
NET EARNINGS PER COMMON SHARE - BASIC                     $         .40    $         .58    $         .27
                                                          -------------    -------------    -------------
Weighted average number of shares outstanding - basic         2,596,000        2,531,000        2,521,000
                                                          -------------    -------------    -------------
NET EARNINGS PER COMMON SHARE - DILUTED                   $         .39    $         .54    $         .27
                                                          -------------    -------------    -------------
Weighted average number of shares outstanding - diluted       2,702,000        2,687,000        2,547,000
                                                          -------------    -------------    -------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2005, 2004 AND 2003

<TABLE>
<CAPTION>
                                                               2005            2004            2003
                                                           ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings                                               $  1,049,000    $  1,458,000    $    683,000
Adjustments to reconcile net earnings  to net
   cash (used in) provided by operating activities:
   Depreciation and amortization                                380,000         378,000         364,000
   Deferred income taxes                                        222,000         344,000         398,000
   Provision for doubtful accounts                              (53,000)         12,000           5,000
   Changes in assets and liabilities:
     Increase in accounts receivable                         (1,793,000)     (3,128,000)       (116,000)
     Decrease in inventories                                  4,189,000       1,788,000       1,730,000
     (Increase) decrease in prepaid expenses and other
        current assets                                         (538,000)         67,000        (242,000)
     (Increase) decrease in other assets                         (3,000)       (313,000)        163,000
     (Decrease) increase in accounts payable and other
        current liabilities                                  (4,040,000)        534,000         745,000
                                                           ------------    ------------    ------------
     Net cash (used in) provided by operating activities       (587,000)      1,140,000       3,730,000
                                                           ------------    ------------    ------------
</TABLE>
--------------------------------------------------------------------------------

                                      F-4
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2005, 2004 AND 2003-(Continued)

<TABLE>
<CAPTION>
                                                              2005            2004            2003
                                                          ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------------------------   ------------    ------------    ------------
  Purchases of property and equipment                         (449,000)       (290,000)       (300,000)
                                                          ------------    ------------    ------------
Net cash used in investing activities                         (449,000)       (290,000)       (300,000)
                                                          ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in notes payable - bank, net           1,540,000         245,000      (5,120,000)
  Proceeds from mortgage loan                                       --              --       3,023,000
  Payment of long-term debt                                   (143,000)       (133,000)        (61,000)
  Payment of acquisition notes                                      --              --      (1,100,000)
  Exercise of stock options                                    314,000         174,000              --
  Repurchase of common stock                                  (408,000)       (576,000)       (287,000)
                                                          ------------    ------------    ------------
Net cash provided by (used in) financing activities          1,303,000        (290,000)     (3,545,000)
                                                          ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           267,000         560,000         (29,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                   626,000          66,000          95,000
                                                          ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                    $    893,000    $    626,000    $     66,000
                                                          ------------    ------------    ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                $    631,000    $    575,000    $    564,000
                                                          ------------    ------------    ------------
  Income taxes                                            $  1,006,000    $    864,000    $    148,000
                                                          ------------    ------------    ------------
  NON-CASH ITEMS:
  Common stock repurchase and exercise of stock options   $     50,000    $    569,000    $         --
                                                          ------------    ------------    ------------
  Tax benefit of non-qualified stock option exercise      $     96,000    $         --    $         --
                                                          ------------    ------------    ------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
   (Concluded)

                                      F-5
<PAGE>

--------------------------------------------------------------------------------
JACLYN, INC. AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE EARNINGS
   (LOSS) YEARS ENDED JUNE 30, 2005, 2004, AND 2003

<TABLE>
<CAPTION>
                          COMMON STOCK                                                                        TREASURY STOCK
                    --------------------------                                                          --------------------------

                                                                            Accumulated
                                                                              Other         Compre-
                                                 Additional                   Compre-       hensive
                                                  Paid in       Retained      hensive       Earnings
                       Shares        Amount       Capital       Earnings      Loss           (Loss)         Shares        Amount
                    ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                    <C>        <C>           <C>           <C>           <C>           <C>                <C>      <C>
BALANCE, JULY 1,
  2002                 3,368,733  $  3,369,000  $ 12,117,000  $  7,575,000  $         --  $         --       807,342  $  7,237,000
Net earnings                  --            --            --       683,000            --       683,000            --            --
Repurchase of
  Common Stock                --            --            --            --            --            --        99,711       287,000
                    ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
BALANCE, JUNE 30,
  2003                 3,368,733     3,369,000    12,117,000     8,258,000            --       683,000       907,053     7,524,000
                                                                                          ------------
Net earnings                  --            --            --     1,458,000            --     1,458,000            --            --
Repurchase of
  Common Stock                --            --            --            --            --            --       289,301     1,145,000
Exercise of
  Stock Options               --            --    (1,727,000)           --            --            --      (303,500)   (2,470,000)
                    ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
BALANCE, JUNE 30,
  2004                 3,368,733     3,369,000    10,390,000     9,716,000            --     1,458,000       892,854     6,199,000
                                                                                          ------------
Net earnings                  --            --            --     1,049,000            --     1,049,000            --            --
Minimum Pension
  Liability,
  net of taxes                --            --            --            --    (1,653,000)   (1,653,000)           --            --
Repurchase of
  Common Stock                --            --            --            --            --            --        71,203       458,000
Exercise of
  Stock Options               --            --      (720,000)           --            --            --      (170,000)   (1,180,000)
                    ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
BALANCE, JUNE 30,
  2005                 3,368,733  $  3,369,000  $  9,670,000  $ 10,765,000  $ (1,653,000) ($   604,000)      794,057  $  5,477,000
                    ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>

JACLYN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

         Jaclyn, Inc. and its subsidiaries (the "Company") are engaged in the
design, manufacture, marketing and sale of apparel, handbags, accessories and
related products. The Company sells its products to retailers, including
department and specialty stores, national chains, major discounters and mass
volume and catalog retailers, throughout the United States.

         The consolidated financial statements include the accounts of the
Company and all of its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

         The most significant estimates made by management include those made in
the areas of inventory, receivables, the valuation of goodwill, deferred taxes,
contingencies and the assessment of the recoverability of goodwill, pensions,
and sales returns and allowances.

         Management periodically evaluates estimates used in the preparation of
the consolidated financial statements for continued reasonableness. Appropriate
adjustments, if any, to the estimates used are made prospectively based on such
periodic evaluations.

                                      F-7
<PAGE>

Cash and Cash Equivalents

         Cash in excess of daily requirements is invested in certificates of
deposits and money market funds with original maturities of three months or
less. Such investments are presented as cash equivalents.

Fair Value of Financial Instruments

         The carrying amount of cash, accounts receivable, accounts and notes
payable and accrued expenses are assumed to approximate fair value due to their
short maturities. The carrying value of the bank loan, which bears interest at a
variable rate, approximates fair value. The carrying value of the mortgage loan
approximates fair value based upon the relatively small change in interest rates
since inception of the mortgage.

Inventories

         Inventory is carried at the lower of cost on a first-in, first-out
basis, or market. Management writes down inventory for estimated obsolescence or
unmarketable inventory based upon assumptions about future demand and market
conditions.

Allowances for Doubtful Accounts/Sales Discounts

         The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments
and also maintains accounts receivable insurance on certain of its customers.

         The Company estimates reductions to revenue for customer programs and
incentive offerings including special pricing agreements, price protection,
promotions and other volume-based incentives, based on terms of the agreement
and/or historical experience.

License Agreements

         The Company enters into license agreements from time to time that
allows us to use certain trademarks and trade names on certain of its products.
These agreements require the Company to pay royalties, generally based on the
sales of such products, and may require guaranteed minimum royalties, a portion
of which may be paid in advance. The Company's accounting policy is to match
royalty expense with revenue by recording royalties at the time of sale at the
greater of the contractual rate or an effective rate calculated based on the
guaranteed minimum royalty and the Company's estimate of sales during the
contract period. If a portion of the guaranteed minimum royalty is determined
not to be recoverable, the unrecoverable portion is charged to expense at that
time. Guaranteed minimum royalties paid in advance are recorded in the
consolidated balance sheets as other assets. As of June 30, 2005 and 2004, there
were no advances.

         Royalty amounts expensed for each of the three fiscal years ended June
30, 2005, 2004, and 2003 were $534,000, $1,119,000, and $215,000, respectively.

                                      F-8
<PAGE>

Property, Plant and Equipment

         Property, plant and equipment are stated at cost. The Company provides
for depreciation and amortization on the straight-line method over the following
estimated useful lives:

        Buildings                           25 to 40 years
        Machinery and equipment             5 years
        Furniture and fixtures              5 years
        Leasehold improvements              Lesser of estimated useful life of
                                                the asset or life of the lease
        Automobiles and trucks              3 to 5 years


Trademarks

         Trademarks, included in other assets, are being amortized on a
straight-line basis over periods not exceeding 10 years.

         Other intangibles totaling $65,000 as of June 30, 2005, included in
"Other Assets", consist of amounts allocated to trade names and patents relating
to the acquisition of Topsville, Inc. The Company incurred $10,000 of
amortization expense in both 2005 and 2004, and $89,000 in 2003. Additional
annual amortization expense of $10,000 will be incurred through 2011.

                                      F-9
<PAGE>

Impairment of Finite-Lived Assets

         The Company evaluates finite-lived assets in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets." Finite-lived assets are evaluated
for recoverability in accordance with SFAS No. 144 whenever events or changes in
circumstances indicate that an asset may have been impaired. In evaluating an
asset for recoverability, the Company estimates the future cash flows expected
to result from the use of the asset and eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss, equal to the excess
of the carrying amount over the fair market value of the asset, is recognized.
Management believes at this time that carrying values are not impaired and
useful lives continue to be appropriate.

Goodwill

         The Company accounts for goodwill under SFAS No. 142, "Goodwill and
Other Intangible Assets." Under SFAS No. 142, goodwill is not amortized, but is
reviewed for impairment annually or more frequently if certain indicators arise.
Management believes at this time, based on the valuation process undertaken,
that the carrying value continues to be appropriate.

Stock-Based Compensation

         The Company periodically grants stock options to employees. Pursuant to
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", the Company accounts for stock-based employee compensation
arrangements using the intrinsic value method. The Company has adopted the
disclosure-only provisions of Financial Accounting Standards Board Statement No.
123, "Accounting for Stock Based Compensation," as amended by Financial
Accounting Standards Board Statement No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure, an Amendment of FASB Statement No.
123." See Note F to the Company's Consolidated Financial Statements. If
compensation cost for the Company's stock option plans had been determined in
accordance with the fair value method prescribed by SFAS No. 123, the Company's
net earnings would have been:

<TABLE>
<CAPTION>
                                                                     Fiscal Year Ended June 30,
                                                             ------------------------------------------
                                                                 2005           2004           2003
                                                             ------------   ------------   ------------
<S>                                                          <C>            <C>            <C>
Net earnings
   As reported                                               $  1,049,000   $  1,458,000   $    683,000
   Deduct: Total stock based employee compensation expense
           determined under fair value based method, net
           of taxes                                                36,000         26,000        183,000
                                                             ------------   ------------   ------------
   Pro forma Net Earnings                                    $  1,013,000   $  1,432,000   $    500,000
                                                             ------------   ------------   ------------
Basic net earnings per share:
----------------------------
   As reported                                               $        .40   $        .58   $        .27
   Pro forma                                                 $        .39   $        .57   $        .20
                                                             ------------   ------------   ------------
Diluted net earnings per share:
------------------------------
   As reported                                               $        .39   $        .54   $        .27
   Pro forma                                                 $        .37   $        .53   $        .20
                                                             ------------   ------------   ------------
</TABLE>

                                      F-10
<PAGE>

         The fair value of each option grant is estimated on the date of each
grant using the Black-Scholes option pricing model. Since options are granted at
fair value, no compensation expense has been recorded. The following weighted
average assumptions were used for grants in 2005 and 2004: risk-free interest
rate of 1.750% and 3.25%, expected life of 10 years; expected volatility of 164%
and 161%; dividend yield of 0%. The fair values generated by the Black-Scholes
model may not be indicative of the future benefit, if any, that may be received
by the option holder.

                                      F-11
<PAGE>

Revenue Recognition

         Revenue is recognized at the time merchandise is shipped or received by
a third party consolidator, normally the same day of the shipment. The Company
offers various sales discounts and incentives to its customers. These discounts
and incentives are recorded at the time of sales as a reduction of sales based
on historical experience and the terms of agreements, if any, between the
Company and its customers. Products are shipped directly to customers using
third party carriers. The customer takes title and assumes the risks and rewards
of ownership of the products when the merchandise leaves the Company's warehouse
or is received by a third party consolidator, as applicable.

Shipping and Handling Costs

         Included in Shipping, Selling and Administrative Expenses are all
shipping and handling costs incurred by the Company, except for amounts billed
to a customer in a sale transaction related to shipping and handling which are
included in revenues. Shipping and handling reimbursements included in revenue
amounted to approximately $2,000, $7,000 and $7,000 for the years ended June 30,
2005, 2004, and 2003, respectively.

Cost of Goods Sold

         Cost of goods sold includes the following: purchasing and receiving
costs, factory inspections, customs duty, freight (including ocean and air
freight), marine insurance, brokerage, in-bound trucking and other freight,
internal transfer costs and other costs of our distribution network.

Shipping, Selling, and Administrative Expenses

         Shipping, selling, and administrative expenses include the following:
public warehousing, carton and shipping expenses, warehouse supervision,
salesmen's salaries and commissions, showroom costs, salesperson's travel and
entertainment and other miscellaneous costs relating to the selling of products,
design and sample making, accounting and computer costs, management and general
supervisory costs and related overhead. Charges recorded in the consolidated
statement of operations for shipping and handling costs amounted to $2,843,000,
$2,804,000, and $2,836,000 for the years ended June 30, 2005, 2004 and 2003,
respectively.

         The Company currently leases approximately 70,000 square feet of its
West New York, New Jersey facility to outside parties. This rental income,
amounting to approximately $256,000, $238,000 and $196,000 in fiscal 2005, 2004
and 2003, respectively, is used to offset a portion of the operating cost of the
building and, as such, is included in our shipping, selling and administrative
expenses.

Segment Reporting

         The Company operates in a single operating segment - the manufacture of
apparel, women's handbag and related accessories. Revenues from customers are
derived from merchandise sales. The Company's merchandise sales mix by product
category for the last three years was as follows:

                                      F-12
<PAGE>

                                                Year ended June 30,
                                     ----------------------------------------
          Product Category              2005           2004           2003
        --------------------         ----------     ----------     ----------
                Apparel                      70%            77%            76%
                Handbags                     30%            23%            24%
                                     ----------     ----------     ----------
                                            100%           100%           100%

         During the years ended June 30, 2005, 2004 and 2003, sales revenues
derived from one customer were 44%, 41% and 36%, respectively. Sales to a second
customer were 19%, 14% and 12%, and to a third customer were 8%%, 13% and 8%,
respectively. The loss of any one of these customers would have a material
adverse effect on the Company's operations.

         At June 30, 2005 and 2004, accounts receivable due from one
customer were 58% and 45%, respectively, and accounts receivable due from a
second customer at June 30, 2005 was 29% (accounts receivable due from this
customer at June 30, 2004 was 25%) of total accounts receivable. Should
either customer not be able to pay any substantial obligation to the
Company, however, that failure would have a material adverse effect on the
Company's operating results. No other customer comprised 10% or more of our
total net accounts receivable as at either of those dates.

         The Company relies on suppliers to purchase a variety of raw materials.
The Company had one supplier who in the aggregate constituted 13% and 15% of the
Company's purchases for the year ended June 30, 2005 and 2004, respectively. The
loss of this supplier would not have a material adverse effect on the Company's
operations since there are alternative suppliers available.

         Recently Issued Accounting Standards

         In December 2004, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123R, "Share-Based Payment", which is an amendment
to FASB Statement No. 123, "Accounting for Stock-Based Compensation."
Statement 123R requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement
based on their fair values, and would be effective for interim or annual
reporting periods beginning after June 15, 2005. We do not expect that the
impact of SFAS No. 123R will be material to the consolidated financial
statements.

                                      F-13
<PAGE>

NOTE B - INVENTORIES

         Inventories consist of the following:

                                            June 30,
                                     -----------------------
                                        2005         2004
                                     ----------   ----------
                   Raw material      $   22,000   $2,932,000
                   Work in process       41,000      450,000
                   Finished goods     3,625,000    4,495,000
                                     ----------   ----------
                                     $3,688,000   $7,877,000
                                     ----------   ----------

NOTE C - PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment is summarized as follows:

                                                      June 30,
                                               -----------------------
                                                  2005         2004
                                               ----------   ----------
          Land                                 $  162,000   $  162,000
          Buildings                             1,181,000    1,181,000
          Machinery and equipment               1,292,000    1,225,000
          Furniture and fixtures                  388,000      347,000
          Leasehold improvements                1,384,000    1,197,000
          Automobiles and trucks                   77,000       89,000
                                               ----------   ----------
                                                4,484,000    4,201,000
          Less: accumulated depreciation and
          amortization                          3,336,000    3,132,000
                                               ----------   ----------
                                               $1,148,000   $1,069,000
                                               ----------   ----------

         Depreciation and amortization expense of $370,000, $368,000 and
$275,000 was recorded during the years ended June 30, 2005, 2004 and 2003,
respectively

NOTE D - COMMITMENTS AND CONTINGENCIES

         The Company leases office facilities under non-cancelable leases, with
escalation clauses, that expire in various years through the year ended June 30,
2010.

         Future minimum payments under non-cancelable operating leases with
initial or remaining terms of one year or more are as follows:

                                      F-14
<PAGE>

                                                Office and
             Year Ended                          Showroom
              June 30,                          Facilities
             ----------                       ---------------
                2006                            $  999,000
                2007                               728,000
                2008                               532,000
                2009                               356,000
                2010                                    --

         Rental expense, including real estate taxes, for all operating leases,
totaled $1,268,000, $1,145,000, and $969,000 for the years ended June 30, 2005,
2004 and 2003, respectively. The Company currently leases approximately 70,000
square feet of its West New York, New Jersey facility to outside parties. Rental
income in fiscal 2005, 2004 and 2003 was $256,000, $238,000 and $196,000,
respectively, and is included in shipping, selling and administrative expenses
as an offset to operating costs of the facility.

         The Company has entered into licensing arrangements with several
companies. The Company is obligated, in certain instances, to pay minimum
royalties over the term of the licensing agreements which expire in various
years through 2008. Aggregate minimum commitments by fiscal year are as follows:

             Year Ended                           Minimum
              June 30,                          Commitments
             ----------                         -----------
                2006                             $ 240,000
                2007                               303,000
                2008                                89,000

         From time to time, the Company and its subsidiaries may be subject to
claims and may become a party to legal proceeding which arise in the normal
course of business. At June 30, 2005, there were no material, pending legal
proceedings or material claims to which the Company was a party. In the opinion
of management, disposition of all claims and legal proceedings is not expected
to materially affect the Company's financial position, cash flows or results of
operations.

         The Company has not provided any financial guarantees as of June 30,
2005 and 2004.

                                      F-15
<PAGE>

NOTE E - CREDIT FACILITIES

         In May 2005, the Company amended its existing bank credit facility. The
amended facility, which will now expire December 1, 2007, continues to provide
for short-term loans and the issuance of letters of credit in an aggregate
amount not to exceed $40,000,000. Based on a borrowing formula, the Company may
borrow up to $25,000,000 in short-term loans and up to $40,000,000 including
letters of credit. The borrowing formula allows for an additional amount of
borrowing during the Company's peak borrowing season from June to October.
Substantially all of the Company's assets are pledged to the bank as collateral
(except for the West New York, New Jersey facility, which has been separately
mortgaged as noted below). The line of credit requires that the Company maintain
a minimum tangible net worth, as defined, and effective June 30, 2005, imposes
certain debt to equity ratio requirements. The Company was in compliance with
all applicable financial covenants as of June 30, 2005. As of June 30, 2005,
borrowing on the short-term line of credit was $5,760000, and the Company had
$13,960,000 of additional availability (based on the borrowing formula) under
its credit facility. At June 30, the Company was contingently obligated on open
letters of credit with an aggregate face amount of approximately $14,591,000.
Borrowing during the year was at the bank's prime rate or below, at the option
of the Company. The bank's prime rate at June 30, 2005 was 6.25%.

         During fiscal 2005, the average amount outstanding under the short-term
line was $8,503,000 with a weighted average interest rate of 5.22%. During 2004,
the average amount outstanding under the short-term line was $8,221,000 with a
weighted average interest rate of 3.89%. The maximum amount outstanding during
fiscal 2005 and fiscal 2004 was $23,930,000 and $22,000,000, respectively.

         In August 2002, the Company consummated a mortgage loan in the amount
of $3,250,000. The financing is secured by a mortgage of the Company's West New
York, New Jersey headquarters and warehouse facility. The mortgage loan bears
interest at a fixed rate of 7% per annum. The financing has a fifteen-year term,
but is callable by the bank lender at any time after September 1, 2007 and may
be prepaid by the Company, along with a prepayment fee, from time to time during
the term of the financing. At June 30, 2005 and 2004, the outstanding balance of
the mortgage loan was $2,880,000 and $3,023,000, respectively. Principal
mortgage payments for the next five years and thereafter, are as follows:


         2006               $     153,000

         2007                     164,000

         2008                     176,000

         2009                     189,000

         2010                     203,000

         Thereafter             1,995,000

                                      F-16
<PAGE>

        NOTE F - STOCK OPTIONS

         The Company maintains two stockholder-approved Stock Option Plans for
key employees and consultants of the Company and one non-employee director plan.

         The Company's 2000 Stock Option Plan, as amended ( the "2000 Plan"),
originally provided for the grant of options to purchase up to 300,000 shares of
Common Stock, and was amended during fiscal 2004 to increase the number of
shares of Common Stock for which options may be granted by an additional 250,000
shares. The 1990 Stock Option Plan of the Company, as amended (the "1990 Plan"),
provided for the grant of an aggregate of 500,000 shares of Common Stock.
Options may no longer be granted under the 1990 Plan, although at June 30, 2005
options to purchase 39,500 shares of Common Stock remained outstanding.
Stockholders of the Company had also approved a 1984 Stock Option Plan of the
Company (as amended, the "1984 Plan"), which originally provided for the grant
of up to 125,000 shares of Common Stock. Options may no longer be granted under
the 1984 Plan and, at June 30, 2004, the last remaining options granted under
the 1984 Plan expired. The Company also has in effect the 1996 Non-Employee
Director Stock Option Plan (the "1996 Plan"), under which options to purchase up
to 100,000 shares of Common Stock may be issued to non-employee directors of the
Company.

         Under the 2000 Plan, the Board of Directors determines the per share
option price which, in the case of incentive stock options granted and to be
granted under the 1990 Plan, may not be less than the fair market value of the
shares of Common Stock subject to the option on the date of the grant, or 110%
of the fair market value for individuals who own or are deemed to own more than
10% of the combined voting power of all classes of stock of the Company. Options
under the 2000 Plan, which may be granted to October 2010, are exercisable as
determined by the Board of Directors at the time of grant. Under the 1996 Plan,
options are automatically granted to non-employee members of the Board of
Directors at the times and in the amounts set forth in the 1996 Plan. The per
share option price for options granted under the 1996 Plan is the fair market
value of the shares of Common Stock subject to the option on the date of grant.
Options may be granted to November 2006 under the 1996 Plan.

         Stock option transactions are summarized below:

                                      F-17
<PAGE>

<TABLE>
<CAPTION>
                                  2005                       2004                        2003
                        ------------------------   ------------------------   -------------------------
                                       Weighted                   Weighted                    Weighted
                                       Average                    Average                     Average
                                       Exercise                   Exercise                    Exercise
                           Shares       Price         Shares       Price         Shares        Price
<S>                       <C>         <C>            <C>         <C>             <C>        <C>
Outstanding -
   beginning of year       377,500    $     2.26      720,161    $     2.95      412,161    $     3.53
Granted                     10,000          6.70       10,000          1.95      322,000          1.75
Exercised                 (170,000)         2.19     (303,500)         2.45           --            --
Expired                    (25,000)         4.13      (39,161)         9.54           --            --
Forfeited                  (10,000)         2.65      (10,000)         2.21      (14,000)         2.86
                        ----------                 ----------    ----------   ----------    ----------
Outstanding and
exercisable end of
year                       182,500    $     3.07      377,500    $     2.26      720,161    $     2.95
                                      ----------                 ----------                 ----------
Weighted-average fair
value of options
granted during the
year                                  $     6.64                 $     4.81                 $     1.08
                                      ----------                 ----------                 ----------
</TABLE>

         During the fiscal year ended June 30, 2005, the Company issued an
aggregate of 50,000 shares of its common stock upon the exercise by eight
employees of the Company (the "optionees") of stock options previously granted.
The Company received an aggregate of $63,258 in cash from the optionees in
partial payment of the exercise price for the issued shares. The Company also
received an aggregate of 6,632 mature shares of Common Stock from the optionees
in partial payment of the exercise price for the issued shares under terms of
the stock option plan under which the stock options were granted. The stock
option plan permits the use of previously acquired shares of Common Stock in
full or partial payment of the applicable exercise price.

         In August 2004, a sales representative of the Company exercised
non-qualified stock options to purchase 120,000 shares of the Company's Common
Stock at $2.10 per share, or $252,000. The shares related to these options were
issued from the Company's treasury shares at an average cost of $6.94 per share,
or approximately $832,800.

         During the fiscal year ended June 30, 2004, certain officers of the
Company exercised options to purchase 290,500 shares of the Company's Common
Stock. As permitted by the applicable stock option plan and contracts governing
the options, the officers tendered to the Company and the Company purchased, in
partial payment of the exercise price for 210,500 of these options, 164,141
mature shares of Common Stock, with a market value of $569,000. During the same
period, the Company repurchased 4,725 shares from employees who received
distributions from the Company's ESOP at a price of $19,000.

         The following table summarizes information about stock options
outstanding at June 30, 2005:

                                      F-18
<PAGE>

<TABLE>
<CAPTION>
                             Options Outstanding and Exercisable
------------------------------------------------------------------------------------------------
                                                         Weighted Average
                                 Number Outstanding          Remaining          Weighted Average
  Range of Exercise Prices        at June 30, 2005     Contractual Life (Yrs)    Exercise Price
----------------------------     ------------------    ----------------------   ----------------
<S>                                         <C>                       <C>                  <C>
$1.65 to $2.10                               41,000                    6.938               $1.70
$2.21 to $2.88                               76,000                    5.118                2.51
$3.15 to $3.75                               19,000                    4.975                3.31
$4.06 to $4.13                               14,500                    0.997                4.06
$4.38 to $5.13                               22,000                    4.948                4.72
$6.00 to $6.90                               10,000                    9.419                6.70
                                 ------------------    ----------------------   ----------------
Totals                                      182,500                    5.377               $3.70
                                 ------------------    ----------------------   ----------------
</TABLE>

NOTE G - PREFERRED STOCK

         The Board of Directors of the Company has authority (without action by
the stockholders) to issue the authorized and unissued preferred stock in one or
more series and, within certain limitations, to determine the voting rights,
preference as to dividends and in liquidation, conversion and other rights of
each such series. No shares of preferred stock have been issued.

NOTE H - INCOME TAXES

         The components of the Company's tax provision (benefit) for the years
ended June 30, 2005, 2004 and 2003 are as follows:

                                                  June 30,
                                   --------------------------------------
                                      2005          2004          2003
                                   ----------    ----------    ----------
      Current:
      Federal                      $   75,000    $  545,000    $  (11,000)
      State and Local                  78,000        79,000       195,000
      Foreign                         193,000       216,000        26,000
                                   ----------    ----------    ----------
                                      346,000       840,000       210,000
      Deferred:
      Federal and State               320,000       344,000       400,000
                                   ----------    ----------    ----------
      Provision                    $  666,000    $1,184,000    $  610,000
                                   ----------    ----------    ----------

         Reconciliation between the provision for income taxes computed by
applying the federal statutory rate to income before income taxes and the actual
provision for income taxes is as follows:

                                      F-19
<PAGE>
<TABLE>
<CAPTION>
                                                                     June 30,
                                                     ---------------------------------------
                                                        2005           2004          2003
                                                     ----------     ----------    ----------
<S>                                                        <C>            <C>           <C>
Provision (benefit) for income taxes at                    34.0%          34.0%         34.0%
   statutory rate
State and local income taxes net of federal                 4.2            3.5           5.7
tax benefit
Expired foreign tax credits                                  --            0.7           4.7
Valuation Allowance for expiring foreign                   (2.0)           3.5            --
tax credits
Other                                                       2.6            3.1           2.9
                                                     ----------     ----------    ----------
Effective tax rate percent                                 38.8%          44.8%         47.3%
                                                     ----------     ----------    ----------
</TABLE>

         A valuation allowance was established in the year ending June 30,
2004 for foreign tax credits that were expected to expire. For the year
ending June 30, 2005, the Company's projections of taxable income indicate
that the Company will have taxable income throughout the foreseeable future
and there is no evidence which suggests that the net deferred tax asset
will not be realized. Accordingly, a valuation allowance is no longer
required.

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Foreign tax
credits are expected to expire through June 30, 2009. The income tax effects of
significant items comprising the Company's net deferred tax assets and
liabilities as of June 30, 2005 and 2004 are as follows:

<TABLE>
<CAPTION>
                                                                June 30,
                                       ----------------------------------------------------------
                                                  2005                           2004
                                       ---------------------------    ---------------------------

                                          Assets      Liabilities        Assets      Liabilities
                                       ------------   ------------    ------------   ------------
<S>                                    <C>            <C>             <C>            <C>
Depreciation and amortization          $    165,000   $         --    $    146,000   $         --
Leases                                                          --              --         15,000
Foreign taxes                               220,000             --         358,000             --
Valuation allowance                                             --         (79,000)            --
Pension Benefit Obligation                1,111,000             --              --             --
Inventory                                   190,000             --         312,000             --
Bad debt, sales allowances and
other reserves                              164,000             --         112,000             --
Other                                       435,000             --         562,000             --
                                       ------------   ------------    ------------   ------------
                                       $  2,285,000   $         --    $  1,411,000   $     15,000
                                       ------------   ------------    ------------   ------------
</TABLE>

                                      F-20
<PAGE>

NOTE I - EMPLOYEES' BENEFIT PLANS

         The Company has a trusteed, defined-benefit pension plan for certain of
their salaried and hourly personnel. The plan provides pension benefits that are
based on a fixed amount of compensation per year of service, career average pay
or on the employee's compensation during a specified number of years before
retirement. A change in the mortality table used to determine the pension plan
balance sheet liability as of June 30, 2005 and future net periodic pension cost
was made during the fourth quarter of fiscal 2005. The mortality table used to
calculate the liability as of June 30, 2005 is the "1994 Group Annuity Reserving
Table (Projected to 2002). This change resulted in an additional pretax
liability totaling $2,086,000 ($1,246,000 after tax, which is included in
"Accumulated Comprehensive Earnings (Loss)" on the Company's Consolidated
Balance Sheet at June 30, 2005). The Company's funding policy is to make annual
contributions required by the Employee Retirement Income Security Act of 1974.

<TABLE>
<CAPTION>
                                                              Fiscal Year Ended June 30,
                                                             ----------------------------
                                                                 2005            2004
                                                             ------------    ------------
<S>                                                          <C>             <C>
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year                  $  5,590,000    $  4,735,000
   Service cost                                                   389,000         332,000
Interest cost                                                     295,000         278,000
Actuarial loss                                                  1,820,000         393,000
Benefits paid                                                    (727,000)       (148,000)
                                                             ------------    ------------
Net benefit obligation at end of year                        $  7,367,000    $  5,590,000
                                                             ------------    ------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year               $  5,297,000    $  4,574,000
Employer contributions                                            752,000         693,000
Benefits paid                                                    (727,000)       (148,000)
Actual (loss) gain on plan assets                                (123,000)        178,000
                                                             ------------    ------------
Fair value of plan assets at end of year                     $  5,199,000    $  5,297,000
                                                             ------------    ------------
Funded status at end of year                                   (2,168,000)       (293,000)
Unrecognized net actuarial loss                                 3,954,000       1,802,000
Unrecognized transition amount                                         --          (9,000)
Unrecognized prior service cost                                        --           1,000
                                                             ------------    ------------
Net amount recognized                                        $  1,786,000    $  1,501,000
                                                             ------------    ------------

                                                                       June 30,
                                                             ----------------------------
                                                                 2005            2004
                                                             ------------    ------------
Amounts recognized in the consolidated balance sheets
(Accrued) prepaid benefit cost                               $   (300,000)   $  1,501,000
Accumulated other comprehensive income                          2,086,000
                                                             ------------    ------------
Net amount recognized                                        $  1,786,000    $  1,501,000
                                                             ------------    ------------
</TABLE>

                                      F-21
<PAGE>

Information for pension plans with an accumulated benefit obligation in excess
of plan assets follows:

Fiscal Year Ended June 30,                             2005            2004
                                                   -------------   -------------
Projected benefit obligation                       $   7,367,000   $   5,590,000
Accumulated benefit obligation                         6,176,000       5,140,000
Fair value of plan assets                              5,199,000       5,297,000


         Pension expenses includes the following components:

<TABLE>
<CAPTION>
        Fiscal Year Ended June 30,                     2005            2004            2003
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
        COMPONENTS OF NET PERIODIC BENEFIT COST:
        Service cost                               $    389,000    $    332,000    $    311,000
        Interest cost                                   295,000         278,000         260,000
        Return on assets                                123,000        (178,000)       (174,000)
        Other actuarial items - net                    (341,000)        (48,000)        (38,000)
                                                   ------------    ------------    ------------
        Net periodic pension cost                  $    466,000    $    384,000    $    359,000
                                                   ------------    ------------    ------------
</TABLE>

         The change in the mortality table referred to above will have the
affect of increasing net periodic pension cost for fiscal 2006 and thereafter.

         Assumptions used to determine Benefit Obligation at June 30, 2005 and
2004 are as follows:

                                                   2005             2004
                                                ----------       ----------
Discount rate                                      4.70%            5.50%
Expected long-term return on plan assets           5.75%            6.00%
Rate of compensation increase                      3.00%            3.75%

         Assumptions used in determining the net periodic cost:

                                                   2005       2004       2003
                                                 --------   --------   --------
Discount rate                                      5.50%      5.75%      5.75%
Rate of increase in compensation levels            3.75%      3.75%      3.00%
Expected long-term rate of return on assets        6.00%      6.00%      6.00%

         The expected long-term return on plan assets assumption represents the
average rate that the Company expects to earn over the long-term on assets
(primarily high-grade government bonds) in the Company's Pension Plan,
including, if any, interest income and capital appreciation. The assumption has
been determined based on expectations regarding future rates of return for the
plan's investment portfolio.

                                      F-22
<PAGE>

         The Company has the responsibility to formulate the investment policy
and strategy for the Pension Plan's assets. The overall policy and strategy
includes maintaining the highest return, with the lowest assumed risk, while
striving to have the Plan fully-funded.

         The Company has retained the professional services of a bond broker,
which selects for investment high-grade government bonds, consistent with the
Company's risk and investment strategy. This broker has investment discretion
over the assets placed under its management, provided it is within the Company's
risk and investment strategy.

         The table below represents the Company's pension plan asset allocation
at June 30, 2005 and 2004 by asset category.


                                                            Asset Allocation
                                                       ------------------------
                   Asset Category                         2005          2004
        ------------------------------------------     -----------   ----------
        Debt securities                                     91%           68%
        Other, primarily cash and cash equivalents           9%           32%
                                                       -----------   ----------
        Total                                              100%          100%
                                                       -----------   ----------

         The Company expects to contribute $775,000 to its defined benefit
pension plan during the fiscal year ended June 30, 2006.

         Anticipated payments during the next ten (10) fiscal years are as
follows:

          Fiscal Year Ending June 30,                  Expected Payment
          ---------------------------                  ----------------
                    2006                                  $  414,000
                    2007                                     249,000
                    2008                                   1,869,000
                    2009                                     766,000
                    2010                                   1,242,000
                 2011-2015                                 4,263,000

         The Company had maintained a non-contributory Employee Stock Ownership
Plan (the "ESOP") and Trust, for its employees who were not covered by a
collective bargaining agreement. The ESOP was terminated, and vested amounts
distributed to all participants. As an accommodation to non-management
participants in the ESOP, the Company offered to purchase the shares of Common
Stock each non-management participant was entitled to receive upon termination
of the ESOP. At June 30, 2005, all but two non-management participants elected
to have the Company purchase their shares (a total of 51,280 shares) at market
value (which aggregated approximately $310,000) on the date of election. There
was no ESOP expense for the years ended June 30, 2005, 2004 and 2003.

         The Company has a 401(K) savings plan for the benefit of its Topsville,
Inc. employees, which existed prior to the Company's acquisition of Topsville.
No contributions by the Company were made during fiscal 2005, 2004 and 2003.

         In December 2004 the Company entered into an amendment to its
collective bargaining agreement with Local 62-32, UNITE, AFL-CIO, which covers
all 9 of Jaclyn's union employees. The

                                      F-23
<PAGE>

term of the agreement has been extended until October 31, 2006. The agreement
allows the Company, in its discretion, to withdraw from the Union's
multi-employer pension plan. A withdrawal would terminate the Company's
obligations to make future contributions to the pension plan, although the
Company would be required to contribute to the union's 401-K plan and as such,
had not recorded any charge relating to this contingency in its consolidated
financial statements. During fiscal 2004, the Company decided to withdraw from
the pension plan. This decision obligates the Company for a portion of the
unfunded pension obligation. The final determination of the withdrawal liability
is impacted by the timing of the final settlement by the Company to withdraw
from the plan and the continued participation of other companies that contribute
to the pension plan. Based on the latest information provided to the Company by
the union, the estimated present value is approximately $500,000 recorded in
accrued expenses.

NOTE J - NET EARNINGS PER SHARE

         The Company's calculation of Basic and Diluted Net Earnings Per Share
are as follows:

<TABLE>
<CAPTION>
                                                           Year Ended June 30,
                                              ------------------------------------------
                                                  2005           2004           2003
                                              ------------   ------------   ------------
<S>                                           <C>            <C>            <C>
Basic Net Earnings Per Share:
Net Earnings                                  $  1,049,000   $  1,458,000   $    683,000
                                              ------------   ------------   ------------
Basic Weighted Average Shares Outstanding        2,596,000      2,531,000      2,521,000
                                              ------------   ------------   ------------
Basic Net Earnings Per Common Share           $        .40   $        .58   $        .27
                                              ------------   ------------   ------------
Diluted Net Earnings Per Share:
Net Earnings                                  $  1,049,000   $  1,458,000   $    683,000
                                              ------------   ------------   ------------
Basic Weighted Average Shares Outstanding        2,596,000      2,531,000      2,521,000
Add:  Dilutive Options                             106,000        156,000         26,000
                                              ------------   ------------   ------------
Diluted Weighted Average Shares Outstanding      2,702,000      2,687,000      2,547,000
                                              ------------   ------------   ------------
Diluted Net Earnings Per Common Share         $        .39   $        .54   $        .27
                                              ------------   ------------   ------------
</TABLE>

----------------------

Options to purchase 10,000 and 256,000 common shares were outstanding as of June
30, 2005 and 2003, respectively, but were not included in the computation of
diluted earnings per share because the exercise price of the options exceeded
the average market price and would have been anti-dilutive.

                                      F-24
<PAGE>

NOTE K - REPURCHASE OF SHARES FOR TREASURY
The Company previously announced that the Board of Directors authorized the
repurchase by the Company of up to 350,000 shares of the Company's Common Stock.
Purchases may be made from time to time in the open market and through privately
negotiated transactions, subject to general market and other conditions. The
Company is financing these repurchases from its own funds from operations and/or
from its bank credit facility. As of June 30, 2005, the Company had purchased
244,783 shares of its Common Stock under this authorization at a cost of
approximately $1,011,000. In addition, during the fourth quarter of fiscal 2005,
the Company repurchased in private transactions 51,280 additional shares of the
Company's Common Stock at a cost of approximately $310,000. These were shares
distributed to non-management participants in the ESOP upon termination of the
ESOP which were repurchased by the Company as an accommodation to those
participants.


NOTE L - UNAUDITED QUARTERLY FINANCIAL DATA

         Summarized quarterly financial data amounts for the fiscal years ended
June 30, 2005 and 2004 are as follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                          ----------------------------------------------------------
                                            June 30,      March 31,      December 31,   September 30,
                                              2005           2005            2004           2004
                                          ------------   ------------    ------------   ------------
<S>                                       <C>            <C>             <C>            <C>
Net sales                                 $ 29,755,000   $ 22,476,000    $ 38,441,000   $ 35,805,000
Gross profit                                 6,844,000      5,205,000       7,882,000      8,594,000
Net earnings (loss)                            668,000       (640,000)        156,000        865,000
Net earnings (loss) per common share -
  basic                                   $        .26   $       (.24)   $        .06   $        .34
Net earnings (loss) per common share -
  diluted                                 $        .25   $       (.24)   $        .06   $        .32


                                                               Three Months Ended
                                          ----------------------------------------------------------
                                            June 30,      March 31,      December 31,   September 30,
                                              2004           2004            2003           2003
                                          ------------   ------------    ------------   ------------
Net sales                                 $ 28,796,000   $ 26,413,000    $ 38,745,000   $ 29,896,000
Gross profit                                 7,553,000      6,721,000       9,328,000      7,590,000
Net earnings (loss)                            441,000       (240,000)        899,000        358,000
Net earnings (loss) per common share -
  basic                                   $        .18   $       (.09)   $        .35   $        .14
Net earnings (loss) per common share -
  diluted                                 $        .17   $       (.09)   $        .33   $        .13
</TABLE>


         Note: The per share amounts are calculated independently for each
quarter. The sum of the quarters may not equal the annual per share amounts.


                                      F-25
<PAGE>

--------------------------------------------------------------------------------
JACLYN INC. AND SUBSIDIARIES

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
             Column                              Column          Column            Column           Column
               A                                   B               C                 D                E
                                                               Additions
                                               Balance at        charged                            Balance
                                              beginning of      to costs                            at end
          Description                            period        and expense       Deductions        of period
                                             --------------   --------------   --------------    --------------
<S>                                          <C>              <C>              <C>               <C>
Fiscal Year ended June 30, 2005
Allowance for doubtful accounts              $      177,000   $           --   $      (53,000)   $      124,000
Allowance for sales discounts, returns and
   allowances                                     2,384,000        7,720,000       (6,840,000)        3,264,000
Fiscal Year ended June 30, 2004
Allowance for doubtful accounts                     165,000           12,000               --           177,000
Allowance for sales discounts, returns and
   allowances                                     2,527,000        5,703,000       (5,846,000)        2,384,000
 Fiscal Year ended June 30, 2003
Allowance for doubtful accounts                     160,000           39,000          (34,000)          165,000
Allowance for sales discounts, returns and
   allowances                                       809,000        6,309,000       (4,591,000)        2,527,000
</TABLE>

                                      F-26
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

      Exhibit No.     Description                                           Page
      -----------     -----------                                           ----

         3(a)         Certificate of Incorporation of the Registrant.

         3(b)         By-Laws of the Registrant (incorporated herein by
                      reference to Exhibit 3(b) to the Registrant's Annual
                      Report on Form 10-K, File No. 1-5863, for the fiscal
                      year ended June 30, 1991).

         4(a)         Promissory Note of the Registrant dated August 14,
                      2002 payable to the order of Hudson United Bank
                      ("HUB") in the principal amount of $3,250,000
                      (incorporated herein by reference to Exhibit 4(a) to
                      the Registrant's Annual Report on Form 10-K, File
                      No. 1-5863, for the fiscal year ended June 30,
                      2002).

         4(b)         Mortgage, Security Agreement and Financing Statement
                      dated August 14, 2002 between the Registrant and HUB
                      (incorporated herein by reference to Exhibit 4(b) to
                      the Registrant's Annual Report on Form 10-K, File
                      No. 1-5863, for the fiscal year ended June 30,
                      2002).

         4(c)         Revolving Loan Agreement dated December 23, 2002
                      between the Registrant and HUB (incorporated herein
                      by reference to Exhibit 4(c) to the Registrant's
                      Annual Report on Form 10-K, File No. 1-5863, for the
                      fiscal year ended June 30, 2003).

         4(d)         First Amendment to Revolving Loan Agreement,
                      Promissory Note and Other Loan Documents dated
                      October 23, 2003 between the Registrant and HUB.

         4(e)         Second Amendment to Revolving Loan Agreement,
                      Promissory Note and Other Loan Documents dated
                      October 23, 2003 between the Registrant and HUB
                      (incorporated herein by reference to Exhibit 4(a) to
                      the Registrant's Quarterly Report on Form 10-Q, File
                      No. 1-5863, for the fiscal quarter ended March 32,
                      2005).

         10(a)        1984 Employee Stock Option Plan of the Registrant
                      (incorporated herein by reference to Exhibit 10(f)
                      to the Registrant's Annual Report on Form 10-K, File
                      No. 1-5863, for the fiscal year ended June 30,
                      1989).*

         10(b)        1990 Stock Option Plan of the Registrant, as amended
                      (incorporated herein by reference to Exhibit 10(g)
                      to the Registrant's Annual Report on Form 10-K, File
                      No. 1-5863, for the fiscal year ended June 30,
                      1991).*

         10(c)        Second Amended and Restated Stockholders' Agreement
                      dated May 12, 2003 among the Registrant and the
                      persons listed on
<PAGE>

                      Schedule A thereto (incorporated herein by reference
                      to Exhibit U to Amendment No. 9 to the Schedule 13D
                      dated May 15, 2003 of Allan Ginsburg, Robert
                      Chestnov, Abe Ginsburg and Howard Ginsburg.).

         10(d)        Key Executive Disability Plan of the Registrant
                      (incorporated herein by reference to Exhibit 10(m)
                      to the Registrant's Annual Report on Form 10-K, File
                      No. 1-5863, for the fiscal year ended June 30,
                      1988).*

         10(e)        1996 Non-Employee Director Stock Option Plan
                      (incorporated by reference to Exhibit 10(o) to the
                      Registrant's Annual Report on Form 10-K, File No.
                      1-5863, for the fiscal year ended June 30, 1998).*

         10(f)        Letter Agreement dated as of December 29, 1997
                      between the Registrant and Robert Chestnov
                      (incorporated herein by reference to Exhibit 2.1 to
                      the Registrant's Current Report on Form 8-K, file
                      No. 1-5863, for the fiscal year ended June 30,
                      1998).*

         10(g)        Purchase and Sale Agreement dated January 11, 1999
                      between Banner Industries of New York, Inc. and
                      Jaclyn, Inc.(incorporated herein by reference to
                      Exhibit 2.1 to the Registrant's Current Report on
                      Form 8-K, file No. 1-5863, dated January 26, 1999).

         10(h)        Purchase and Sale Agreement dated January 10, 2002
                      between Mark Nitzberg and the Registrant
                      (incorporated herein by reference to Exhibit 2.1 to
                      the Registrant's Current Report on Form 8-K, File
                      No. 1-5863, dated January 24, 2002).

         10(i)        Consulting Agreement dated January 10, 2002 between
                      Natoosh, LLC, Mark Nitzberg and the Registrant
                      (incorporated herein by reference to Exhibit 2.2 to
                      the Registrant's Current Report on Form 8-K, File
                      No. 1-5863, dated January 24, 2002).

         10(j)        Amendment to Consulting Agreement dated December 15,
                      20003 between Natoosh, LLC, Mark Nitzberg and the
                      Registrant (incorporated herein by reference to
                      Exhibit Annual Report on Form 10-K, File No. 1-5863,
                      for the fiscal year ended June 30, 2004).

         10(k)        Payment and Indemnification Agreement dated January
                      10, 2002 by and among Capital Factors, Inc.,
                      Topsville, Inc., Mark Nitzberg and the Registrant
                      (incorporated herein by reference to Exhibit 2.3 to
                      the Registrant's Current Report on Form 8-K, File
                      No. 1-5863, dated January 24, 2002).

         10(l)        Consent and Joinder Agreement dated August 10, 2004
                      among the Registrant, Mark Nitzberg and the persons
                      listed on Schedule A thereto (incorporated herein by
                      reference to Exhibit U to
<PAGE>

                      Amendment No. 12 to the Schedule 13D dated August
                      16, 2004 of Allan Ginsburg, Robert Chestnov, Abe
                      Ginsburg and Howard Ginsburg.).

         14           Code of Ethics for Finance Professionals of the
                      Registrant (incorporated herein by reference to
                      Exhibit 14 to the Registrant's Annual Report on Form
                      10-K, File No. 1-5863, for the fiscal year ended
                      June 30, 2004).

         21           Subsidiaries of the Registrant.

         31(a)        Rule 13a-14(a) Certification of Robert Chestnov,
                      President and Chief Executive Officer of the
                      Company.

         31(b)        Rule 13a-14(a) Certification of Anthony Christon,
                      Principal Financial Officer of the Company.

         32           Certification Pursuant to 18 U.S.C. Section 1350, as
                      Adopted Pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002.

         99(a)        Code of Business Conduct and Ethics of the
                      Registrant (incorporated herein by reference to
                      Exhibit 99(a) to the Registrant's Annual Report on
                      Form 10-K, File No. 1-5863, for the fiscal year
                      ended June 30, 2004).

-------------------
*Management contract or compensatory plan or arrangement
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.A
<SEQUENCE>2
<FILENAME>ex_3a.txt
<DESCRIPTION>EXHIBIT 3(A)
<TEXT>
                                                               EXHIBIT 3(a)
                                                               ------------

                        CERTIFICATE OF INCORPORATION

                                     OF

                                JACLYN, INC.
                                ------------


                         The undersigned, a natural person, for the purpose
            of organizing a corporation for conducting the business and
            promoting the purposes hereinafter stated, under the provisions
            and subject to the requirements of the laws of the State of
            Delaware (particularly Chapter 1, Title 8 of the Delaware Code
            and the acts amendatory thereof and supplemental thereto, and
            known, identified and referred to as the "General Corporation
            Law of the State of Delaware") hereby certifies that:

                         FIRST: The name of the corporation (hereinafter
            called the "Corporation") is JACLYN, INC.

                         SECOND: The address, including street, number,
            city and county, of the registered office of the corporation in
            the State of Delaware is 229 South State Street, City of Dover,
            County of Kent; and the name of the registered agent of the
            Corporation in the State of Delaware at such address is The
            Prentice-Hall Corporation System, Inc.

                         THIRD: The nature of the business and of the
            purposes to be conducted and promoted by the corporation shall
            be to conduct any lawful business, to promote any lawful
            purpose, and to engage in any lawful act or activity for which
            corporations may be organized under the General Corporation
            law of the State of Delaware, which shall include, without
            limiting the generality of the foregoing, the following.

                              To design, manufacture, buy, sell, import,
                              export and otherwise deal in and with
                              handbags, pocketbooks, wallets, clothing and
                              accessories of any kind whatsoever.

                              To purchase, receive, take by grant, gift,
                              devise, bequest, or otherwise, lease, or
                              otherwise acquire, own, hold, use, employ,
                              improve, sell, convey, exchange, transfer,
<PAGE>

                              or otherwise dispose of, mortgage, pledge, or
                              otherwise create a security interest in,
                              lease or otherwise permit others to use, and
                              generally to deal in and with, as prin-
                              cipal, agent, broker, or otherwise, property
                              of every kind and nature, whether real
                              personal and whether tangible or intangible,
                              and any interest therein, without limit as
                              to amount of kind, and wherever situated.

                                   To apply for, purchase, or otherwise
                              acquire, own, use, introduce, develop,
                              exploit, deal in, sell, assign, and otherwise
                              dispose of, and grant licenses or sublicenses
                              in respect of, and otherwise turn to
                              account, any trademarks, trade names,
                              patents, processes, improvements, inventions,
                              discoveries, formulae, copyrights, service
                              marks, labels and designs.

                                   To purchase or otherwise acquire, and to
                              hold, Sell, assign, transfer, mortgage,
                              pledge, exchange Or otherwise dispose of, and
                              to guarantee securities (which term for the
                              purpose of this Article Third, includes,
                              without limitation of the generality thereof,
                              any shares of stock, bonds, debentures,
                              notes, mortgages, or other obligations, and
                              any certificates, receipts, or other
                              instruments representing rights to receive,
                              purchase, or subscribe for the same, or
                              representing any other rights of interests
                              therein or in any property or assets) created
                              or issued by any persons, firms,
                              associations, corporations, or governments,
                              governmental authorities, or subdivisions
                              thereof, domestic or foreign; to make payment
                              therefore in any lawful manner; and to exer-
                              cise, as owner of holder of any securities,
                              any and all rights, powers, and privileges in
                              respect thereof, including the right to vote
                              thereon.

                                   To enter into, make, and perform and
                              carry out or cancel and rescind, contracts of
                              every kind and description with any person,
                              trustee, entity, syndicate, partnership,
                              association, corporation, or governmental,
                              municipal or public authority, domestic or
                              foreign.
<PAGE>

                                   To be a promoter, partner, member,
                              associate or manager of other business
                              enterprises or ventures, and to the extent
                              permitted by law to be incorporator of
                              other corporations of any type or kind; to
                              acquire by purchase, exchange, or otherwise,
                              all, or any part of, or any interest in, the
                              properties, assets, business and good will of
                              any one or more persons, firms, associations,
                              or corporations, to pay for the same in cash,
                              property, or is won or other securities, to
                              hold, operate, reorganize, liquidate, sell or
                              in any manner dispose of the whole or any
                              part thereof, and in connection there with,
                              to assume, guarantee performance of, or
                              other-side provide for any liabilities,
                              obligations, or contracts of such persons,
                              firms, associations or corporations, to
                              conduct the whole or any part of any business
                              thus acquired; and acting alone, or as a
                              promoter, partner, member associate, or
                              manager of other business enterprises or
                              ventures, to conduct or participate or
                              engage in any commercial, mercantile,
                              trading, manufacturing, industrial service,
                              real estate, or other business or activity,
                              foreign or domestic, as may be lawfully
                              conducted or participated or engaged in by a
                              corporation organized under the laws of the
                              State of Delaware.

                                   To lend its uninvested funds from time
                              to time to such extent, to such persons,
                              firms, associations, corporations,
                              governments or subdivisions thereof, an on
                              such terms and on such security, if any, as
                              the Board of Directors of the corporation may
                              determine.

                                   To make any guaranty, respecting stocks,
                              dividends, securities, indebtedness,
                              interest, contracts, or other obligations, so
                              far as the same may be permitted to be done
                              by a corporation organized under the laws of
                              the State of Delaware.

                                   To borrow money from time to time, and
                              without limit as to amount; from time to time
                              to issue and sell its own securities in such
<PAGE>

                              amounts, at such prices, on such terms and
                              conditions, and for such purposes, now of
                              hereafter permitted by the laws of the State
                              of Delaware and by this Certificate of
                              Incorporation, s the Board of Directors of
                              the Corporation my determine; and to secure
                              such

                              securities by mortgage upon, or the pledge
                              of, or the conveyance of assignment in trust
                              of, the whole or any part of the properties,
                              assets, business, and good will of the
                              corporation, then owned or thereafter
                              acquired.

                                   To draw, make accept, endorse, discount,
                              execute, and issue promissory notes, drafts,
                              bills of exchange, warrants, bonds,
                              debentures, and other negotiable or
                              transferable instruments and evidences of
                              indebtedness, whether secured by mortgage or
                              otherwise, as to secure the same by mortgage
                              or otherwise, so far as may be permitted by
                              the laws of the State of Delaware.

                                   To purchase, hold, cancel, reissue,
                              sell, exchange, transfer, or otherwise deal
                              in its own securities from time to time, to
                              such an extent, in such manner, and upon such
                              terms, as the Board of Directors of the
                              corporation shall determine; provided,
                              however, that the corporation shall not use
                              its funds or property for the purchase of its
                              own shares of capital stock when such use
                              would cause any impairment of its capital,
                              except to the extent permitted by law.

                                   To do everything necessary, proper,
                              advisable, or convenient for the
                              accomplishment of any of the purposes or the
                              attainment of any of the objects, or the
                              furtherance of any of the powers herein set
                              forth and to do every other act and thing
                              incidental thereto or connected therewith,
                              provided the same be not forbidden by the
                              laws of the State of Delaware.

                              The foregoing clauses shall be construed as
                              powers as well as objects and purposes, and
                              the matters expressed in each clause shall,
                              except if otherwise expressly provided, be in
                              no way limited by reference to or inference
                              from the terms of any other clause, but shall
                              be regarded as independent objects, pur-
<PAGE>

                              poses, and powers and the enumeration of
                              specific objects, purposes, and powers shall
                              not be construed to limit or restrict in any
                              manner the meaning of general terms or the
                              general powers of the corporation; nor shall
                              the expression of one thing be deemed to
                              exclude another not expressed, although it be
                              of like nature.

                                   The corporation shall be authorized to
                              exercise and enjoy all other powers, rights,
                              and privileges granted to corporations
                              formed under the General Corporation Law and
                              all the powers conferred upon such
                              corporations by the laws of Delaware, as in
                              force from time to time, so far as not in
                              conflict herewith, or which may be conferred
                              by all acts heretofore or hereafter
                              amendatory of or supplemental to said laws,
                              and the enumeration of certain powers as
                              herein specified is not intended as exclusive
                              of, or as a waiver of, any of the powers,
                              rights, or privileges granted or conferred by
                              said laws now or hereafter in force.

                         FOURTH: The total number of shares of all classes
            of stock which the corporation shall have authority to issue is
            Four Million (4,000,000.) shares, consisting of

                                     (a) One Million (1,000,000.) shares of
                                Preferred Stock of the par value of $1 per
                                share (hereinafter referred to as
                                "Preferred Stock"); and
                                     (b) Three Million (3,000,000.) shares
                                of Common Stock of the par value of $1 per
                                share (hereinafter referred to as "Common
                                Stock")

            A.   Preferred Stock
                 ---------------

                         Shares of Preferred Stock my be issued from time
            to time in one or more series, as may from time to time be
            determined by the Board of Directors, each of said series to be
            distinctly designated. All shares of any one series of
            preferred Stock shall be alike in every particular, except that
            there may be different dates from which dividends, if any,
            thereon shall be cumulative, if made cumulative. The voting
            powers and the preferences and relative, participating,
            optional and other special rights of each such series, and the
            qualifications, limitations, or restricttions thereof, if
            any, may differ from those of any and all other series at any
            time outstanding; and the Board of Directors of the corporation
            is hereby expressly granted authority to fix by resolution or
            resolutions adopted prior to the issuance of any shares of a
            particular series of Preferred Stock, the voting powers and the
            designations, preferences and relative, optional and other
            special rights, and the qualifications, limitations and
            restrictions of such series, including but without limiting the
            generality of the foregoing, the following:
<PAGE>

                                     (a) The distinctive designation of,
                                and the number of shares of Preferred Stock
                                which shall constitute each series, which
                                number may be increased (except where
                                otherwise provided by the Board of
                                Directors) or decreased (but not below the
                                number of shares thereof then outstanding)
                                from time to time by like action of the
                                Board of Directors;

                                     (b) The rate and times at which, and
                                the terms and conditions on which,
                                dividends, if any, on Preferred Stock of
                                each series shall be paid, the extent of
                                the preference of relation, if any, of such
                                dividends to the dividends payable on any
                                other class or classes or series of the
                                same or other classes of stock and whether
                                such dividends shall be cumulative or
                                non-cumulative;

                                     (c) The right, if any, of the holders
                                of Preferred Stock of such series to
                                convert the same into, or exchange the same
                                for, shares of any other class or classes
                                or of any series of the same or any other
                                class or classes of stick of the
                                corporation and the terms and conditions of
                                such conversion or exchange;

                                     (d) Whether or not Preferred Stock of
                                such series shall be subject to redemption,
                                and the redemption price or prices and
                                the time or times at which, and the terms
                                and conditions on which, Preferred Stock of
                                such series may be redeemed;

                                     (e) The rights, if any, of the holders
                                of Preferred Stock of such series upon the
                                voluntary or involuntary liquidation,
                                merger, consolidation, distribution or sale
                                of assets, dissolution or winding-up of
                                the corporation;

                                     (f) The terms of the sinking fund or
                                redemption or purchase account, if any, to
                                be provided for the Preferred Stock of such
                                series; and

                                     (g) The voting powers, if any, of the
                                holders of such series of Preferred Stock
                                which may, without limiting the generality
                                of the foregoing, include the right, voting
                                as a series by itself or together with
                                other series of Preferred Stock or all
<PAGE>

                                series of Preferred Stock as a class, to
                                elect one or more directors of the
                                corporation if there shall have been a
                                default in the payment of dividends on any
                                one or more series of Preferred Stock or
                                under such other circumstances and on such
                                conditions as the Board of Directors may
                                determine; provided, however, that each
                                holder of Preferred Stock shall have no
                                more than one vote in respect of each share
                                of Preferred Stock held by him on any
                                matter voted upon by the stockholders.

            B.   Common Stock
                 ------------

                         1.     After the requirements with respect to
            preferential dividends on the Preferred Stock (fixed in
            accordance with the provision of paragraph A of this article
            fourth), if any, shall have been met and after the corporation
            shall have complied with all the requirements, if any, with
            respect to the setting aside of sums as sinking funds or
            redemption or purchase accounts (fixed in accordance with two
            provisions of paragraph A of this article fourth), and subject
            further to any other conditions which may be fixed in
            accordance with the provisions of paragraph A of this article
            fourth, then and not otherwise the holders of Common stock
            shall be entitled to receive such dividends as may be declared
            from time to time by the Board of Directors.

                         2.     After distribution in full of the
            preferential amount, if any, (fixed in accordance with the
            provisions of paragraph A of this article fourth) to be
            distributed to the holders of Preferred Stock in the event of
            voluntary or involuntary liquiddation, distribution or sale
            of assets, dissolution or winding-up, of the corporation, the
            holders of the Common Stock shall be entitled to receive all
            the remaining assets of the corporation; tangible and
            intangible, of whatever kind available for distribution to
            stockholders ratably in proportion to the number of shares of
            Common Stock held by them respectively.

                         3.     Except as my otherwise be required by law
            or by the provisions of such resolution or resolutions as may
            be adopted by the Board of Directors pursuant to paragraph A of
            this article fourth, each holder of Common Stock shall have one
            vote in respect of each share of Common Stock held by him on
            all matters voted upon by the stockholders.

            C.   Other Provisions
                 ----------------
<PAGE>

                         1.      The relative powers, preferences and rights
            of which each series of Preferred Stock in relation to the
            powers, preferences and rights of each other series of
            Preferred Stock shall, in each case, be so fixed from time to
            time by the Board of Directors in the resolution or resolutions
            adopted pursuant to authority granted in paragraph A of this
            article fourth and the consent, by clause or class or series
            vote or otherwise, of the holders on such of the series of
            Preferred Stock as are from time to time outstanding shall not
            be required for the issuance by the Board of Directors of any
            other shares of Preferred Stock whether or not the powers,
            preferences and rights of such other series hall be fixed by
            the Board of Directors as senior to, or on a parity with, the
            powers, preferences and rights of such outstanding series, or
            any of them, provided however, that the Board of Directors
            may provide in the resolution or resolutions as to any series
            of Preferred Stock adopted pursuant to paragraph A of this
            article fourth that the consent of the holders of a majority
            (or such greater proportion as shall be therein fixed) of the
            outstanding shares of such series voting thereon shall be
            required for the issuance of any or all other series of
            Preferred Stock.

                         2.     Subject to the provisions of subparagraph 1
            of this paragraph C, shares of any series of Preferred Stock
            may be issued from time to time as the Board of Directors of
            the corporation shall determine and on such terms and for
            such consideration as hall be fixed by the Board of
            Directors.

                         3.     Shares of Common Stock may be issued from
            time to time as the Board of Directors of the corporation shall
            determine and on such terms and for such consideration a
            shall be fixed by the Board of Directors.

                         4.     The authorized amount of shares of Common
            Stock and of Preferred Stock may, without a class or series
            vote, increased or decreased from time to time by the
            affirmative vote of the holders of a majority of the stock of
            the corporation entitled to vote thereon.

                         FIFTH:   The name and the mailing address of the in-
            corporator are as follow:

               Name                           Mailing Address
               ----                           ---------------

            Mary DeWitt                       500 Fifth Avenue
                                              New York, New York  10036
<PAGE>

                         SIXTH:   The names and the mailing addresses if the
            persons who are to serve as the director's until the first
            annual meeting of stockholders or until their successors are
            elected and qualify are as follows:

            Name:                             Mailing Address
            -----                             ---------------
            Abraham Ginsburg                  635 59th Street
                                              West New York, NJ

            Martin Ginsburg                   635 59th Street
                                              West New York, NJ

            Allan Ginsburg                    635 59th Street
                                              West New York, NJ

            Walter Gailing                    635 59th Street
                                              West New York, NJ

                         SEVEN:   Whenever a compromise or arrangement is
            proposed between this corporation and its creditors or any
            class of them and/or between this corporation and its
            stockholders or any class of them, any court of equitable
            jurisdiction within the State of Delaware may, on the
            application in a summary way of this corporation or of any
            creditor or stockholder thereof or on the application of any
            receiver or receivers appointed for this corporation under the
            provisions of section 291 of Title 8 of the Delaware Code or on
            the application of trustees in dissolution or of any receiver
            or receivers appointed for this corporation under the
            provisions of section 279 of Title 8 of the Delaware Code order
            a meeting of the creditors or class of creditors, and/or of the
            stockholders or class of stockholders of this corporation, as
            the case may be, to be summoned in such manner as the said
            court directs. If a majority in number representing
            three-fourths in value of the creditors or class of creditors,
            and/or of the stockholders or class of stockholders of the cor-
            poration, as the case may be, agree to any compromise or
            arrangement and to any reorganization of this corporation as
            consequence or such compromise or arrangement, the said
            compromise or arrangement with the said reorganization shall,
            if sanctioned by the court in which the said application has
            been made, be binding on all the creditors or class of
            creditors, and/or on all the stockholders or class of
            stockholders, of this corporation, as the case may be, and also
            on this corporation.
<PAGE>

                         EIGHTH:   For the management of the business and for
            the conduct of the affairs of the corporation, and in further
            definition, limitation and regulation of the powers of the
            corporation and its directors and of its stockholders or any
            class thereof, as the case may be, it is further provided:

                         1.     The number of directors which shall
            constitute the whole Board of Directors shall be fixed by, or
            in the manner provided in, the By-Laws. The phrase "whole
            Board" and the phrase "total number of directors" shall be
            deemed to have the corporation would have if there were no
            vacancies. No election of director; need be by written ballot.

                         2.     In furtherance and not in limitation of the
            powers conferred by the laws of the State of Delaware, the
            Board of Directors is expressly authorized and empowered.

                                     (a)  To make, alter or repeal by-laws,
                                subject to the power of the stockholders to
                                alter or repeal the by-laws made or altered
                                by the Board of directors.

                                     (b)  Subject to the provisions of the
                                laws of the State of Delaware and to the
                                applicable provisions of the by-laws then
                                in effect, to determine, from time to time,
                                as what times and places and under what
                                conditions and regulations the accounts and
                                books of the corporation, or any of them,
                                shall be open to the inspection of the
                                stockholders, and no stockholder shall have
                                any right to inspect any account or book or
                                document of the corporation, except as
                                conferred by the laws of the State of
                                Delaware, unless and until authorized so to
                                do by resolution of the Board of Directors
                                or of the stockholders of the corporation.

                                     (c)  Without the assent or vote of the
                                stockholders, to authorize and issue
                                obligations of the corporation, secured or
                                unsecured, to include therein such
                                covenants and restrictions and such
                                provisions as to redeemability,
                                convertibility, or otherwise, as the Board
                                of Directors, in its sole discretion, may
                                determine, and to authorize
<PAGE>

                                the mortgaging or pledging, as security
                                therefore, of any property of the
                                corporation, real or personal, including
                                after-acquired property.

                                     (d) From time to time in such manner
                                and upon such terms and conditions as my be
                                determined by the Board of Directors, to
                                provide and carry our and recall, abolish,
                                revise, alter or change one or more stock
                                option, bonus, profit-sharing, retirement,
                                insurance, pension, and other types of
                                incentive, compensation and benefit plans
                                for the employees (including officers and
                                directors) of the corporation and its
                                subsidiaries and to fix the amount of
                                profits to be distributed or shared and to
                                determine the persons to participate in any
                                such plans and the amounts of their
                                respective participations.

                                     (e) To set apart our of any of the
                                funds available for dividends a reserve or
                                reserves for any proper purpose and to
                                abolish any such reserve.

                                In addition to the powers and authorities
            hereinbefore or by statute expressly conferred upon it, the
            Board of Directors may exercise all such powers and do all such
            acts and things as may be exercised or done by the corporation,
            subject, nevertheless, to the provisions of the laws of the
            State of Delaware, of the Certificate of Incorporation, and of
            the by-laws of the corporation.

                         3.     In lieu of taking any permissive or
            requisite action by vote at a meeting of stockholders, any such
            vote and any such meeting may be dispensed with if either all
            of the stockholders entitled to vote upon the action at any
            such meeting shall consent in writing to any such corporate
            action being taken or if less than all of the stockholders
            entitled to vote upon the action at any such meeting shall
            consent in writing to any such corporate action being taken;
            provided, that any such action taken upon less than the
            unanimous written consent of all stockholders entitled to vote
            upon any such action shall be by the written consent of the
            stockholders holding at least the minimum percentage of the
            votes required to be cast to authorize any such action under
            the provisions of the General Corporation Law or under the
<PAGE>

            provisions of the certificate of incorporation or the by-laws
            as permitted by the provisions of the General Corporation Law

            and, provided, that prompt notice be given to all stockholders
            entitled to vote on any such action of the taking of such
            action without a meeting and by less than unanimous written
            consent.

                         NINTH:    Any contract, transaction, or act of the
            corporation or of the Board of Directors, which shall be
            ratified by a majority in interest of a quorum of the
            stockholders of the corporation having voting power at any
            annual meeting or any special meeting called for such purpose,
            shall be as valid and as binding as though ratified by every
            stockholder of the corporation; provided, however, that any
            failure of the stockholders to approve or ratify such contract,
            transaction, or act, when and if submitted, shall nor be deemed
            in any way to invalidate the same or to deprive the
            corporation, its directors or officers, of their right to
            proceed with such contract, transaction, or action.

                          TENTH:   The corporation shall, to the full extent
            permitted by Section 145 of the General Corporation Law of
            the State of Delaware, as amended from time to time, indemnify
            all persons whom it may indemnify pursuant thereto.

            Signed at New York, NY
            on August 2, 1968

                                       /s/ MARY DEWITT
                                       -------------------------------------
                                       Incorporator
<PAGE>

            STATE OF NEW YORK  )
                               )  ss.:
            COUNTY OF NEW YORK )

                  BE IT REMEMBERED that personally appeared before me, the
            undersigned, a Notary Public duly authorized to take
            acknowledgment of deeds by the laws of the place where the
            foregoing certificate of incorporation was signed, MARY DEWITT,
            the incorporator who signed the foregoing certificate of
            incorporation, known to me personally to be such, and who
            acknowledged the same to be her act and deed, and that the
            facts therein stated are true.

                  GIVEN under my hand on August 2, 1968.



                                       /s/ HARVEY BRECHER
                                       -------------------------------------
                                       Notary Public

<PAGE>

                               Agreement of Merger
                                       of
                         Aetna Leather Novelty Co., Inc.
                           (a New Jersey corporation)

                                       and

                                  Jaclyn, Inc.
                            (a Delaware corporation)

                              *********************

         Agreement of Merger dated August 22, 1968, by and between Aetna Leather
Novelty Co., Inc. (herein called "Aetna"), a corporation organized and existing
under the laws of the State of New Jersey, and Jaclyn, Inc. (herein sometimes
called the "Surviving Corporation"), a corporation organized and existing under
the laws of the State of Delaware (such two corporations being sometimes herein
called the "Constituent Corporations").

         The principal office of Aetna in New Jersey is located at 635 59th
Street, West New York, New Jersey 07093, and Alex Chestnov is the agent therein
and in charge thereof upon whom process against Aetna may be served within New
Jersey. The principal office of the Surviving Corporation in Delaware is located
at 229 South State Street, Dover, Delaware 19901, and the Prentice-Hall
Corporation System, Inc. is agent therein and in charge thereof upon whom
process against the Surviving Corporation may be served within Delaware. Aetna
has an authorized capital stock of 5000 shares of Preferred Stock, $100 par
value per share, of which 4,800 shares are outstanding, 1000 shares of Common
Stock, without par value, of which 380 shares are outstanding and 1000 shares of
Common Stock, Class B, without par value, of which 820 shares are outstanding.
The Surviving Corporation has an authorized capital stock of 1,000,000 shares of
Preferred Stock, $1 par value per share, of which none is outstanding, and
3,000,000 shares of Common Stock, $1 par value per share, of which 10 shares are
outstanding.

         The Board of Directors of each of the Constituent Corporations deems it
to the benefit and advantage of such corporation and the stockholders thereof
that Aetna merge with and into the Surviving Corporation under and pursuant to
the provisions of Title 14 of the Revised Statutes of the State of New Jersey
and the provisions of the General Corporation Law of the State of Delaware, and
the Board of Directors of each of the Constituent Corporations has, by
resolutions duly adopted, approved this Agreement.

         In consideration of the foregoing and the mutual agreements hereinafter
set forth, the parties hereto agree that, in accordance with the provisions of
Title 14 of the Revised Statutes of New Jersey and the provisions of the General
<PAGE>

Corporation Law of the State of Delaware, Aetna shall be merged with and into
the Surviving Corporation, and that the terms and conditions of such merger and
the mode of carrying it into effect are, and shall be, as herein set forth.

                                    Article I

         On and after the effective date of the merger the name of the Surviving
Corporation shall be Jaclyn, Inc.

         The Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of Jaclyn, Inc. There is hereby reserved to the
Surviving Corporation the right from and after the effective date of the merger
to amend, alter or modify its Certificate of Incorporation and to add thereto or
insert therein additional provisions authorized by the laws of the State of
Delaware at the time in force, in the manner now or hereinafter prescribed or
permitted by said laws; and all rights, powers and privileges conferred by said
laws; and all rights, powers and privileges conferred by such Certificate of
Incorporation or this Agreement upon any stockholder of the Surviving
Corporation or any other person are granted and shall be held and enjoyed
subject to such reserved right.

                                   Article II

         The By-Laws of Jaclyn, Inc., as in effect on the effective date of the
merger, shall be the By-Laws of the Surviving Corporation until altered, amended
or repealed as provided therein.

                                   Article III

         On and after the effective date of the merger the number of directors
of the Surviving Corporation shall be four and the number of officers of the
Surviving Corporations shall be five. The name and post-office addresses of the
directors and officers of the Surviving Corporation, who shall hold office from
the effective date of the merger until their successors are chosen or appointed,
either according to law or the By-Laws of the Surviving Corporation, are as
follows:
<PAGE>
<TABLE>
<CAPTION>

                                    Directors

    Name                                                  Post Office Address
    ----                                                  -------------------

<S>                                                       <C>
Abe Ginsburg                                              35 59th Street
                                                          est New York, New Jersey  07093

Martin Ginsburg                                           35 59th Street
                                                          est New York, New Jersey  07093

Walter Gailing                                            35 59th Street
                                                          est New York, New Jersey  07093

Allan Ginsburg                                            35 59th Street
                                                          est New York, New Jersey  07093

                                    Officers

Chairman of the Board       Abe Ginsburg                  635 59th Street
                                                          West New York, New Jersey 07093

President                   Martin Ginsburg               635 59th Street
                                                          West New York, New Jersey 07093

Vice-President              Walter Gailing                635 59th Street
and Assistant                                             West New York, New Jersey 07093
Secretary

Vice President              Allan Ginsburg                635 59th Street
and Assistant                                             West New York, New Jersey 07093
Secretary

Secretary-Treasurer         Alex Chestnov                 635 59th Street
                                                          West New York, New Jersey 07093
</TABLE>

         If on the effective date of the merger a vacancy shall exist in the
Board of Directors or in any of the offices of the Surviving Corporation, as the
same are specified above, such vacancy may thereafter be filled in the manner
provided by the By-Laws of the Surviving Corporation.

Article IV

         The manner and basis of converting the shares of the Constituent
Corporations into shares of the Surviving Corporation shall be as follows:
<PAGE>

         Each share of Aetna's Common Stock, of whatever class, together with
each four shares of Aetna's Preferred Stock, issued and outstanding on the
effective date of the merger shall, by virtue of the merger and without any
action on the part of the holder thereof, be converted forthwith into 916 2/3
shares of Common Stock of the Surviving Corporation.

         Each share of Common Stock of the Surviving Corporation issued and
outstanding immediately prior to the effective date of the merger shall, by
virtue of the merger and without any action on the part of the holder thereof,
be cancelled and retired and become part of the authorized but unissued shares
of Common Stock of the Surviving Corporation.

         All shares of stock of the Surviving Corporation issued hereunder to
the holders of shares of stock of Aetna shall be fully paid and nonassessable
and shall be issued in full satisfaction of all rights pertaining to the
respective shares of stock of Aetna.

         Until so surrendered each outstanding certificate for shares of Aetna
shall be deemed for all corporate purposes to evidence the ownership of the
number of shares of Common Stock of the Surviving Corporation to which the
holder thereof shall be entitled.

                                    Article V

         Upon the merger becoming effective, the separate existence of Aetna
shall (except to the extent continued in accordance with this Agreement or by
statute) cease, Aetna shall be merged into the Surviving Corporation and, in
accordance with this Agreement, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises, as well of a public as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations to the merger, and all and singular, the rights,
privileges, powers and franchises of each of said Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of said
Constituent Corporations on whatever account shall be bested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises and all
and every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of each of said Constituent Corporations, and
the title to any real estate vested by deed or otherwise under the laws of any
state in either of the Constituent Corporations shall not revert nor be in any
way impaired by reason of the merger; provided that all rights of creditors and
all liens upon the property of each of said Constituent Corporations shall be
preserved unimpaired, limited in lien to the property affected by such liens at
the time when the merger shall become effective, and all debts, liabilities,
restrictions and duties of each of said Constituent Corporations shall
thenceforth be debts, liabilities, restrictions and duties of the Surviving
Corporation and may be enforced against it to the same extent as if all of said

<PAGE>

debts, liabilities, restrictions and duties had been incurred or contracted by
the Surviving Corporation. Aetna may be deemed to continue in existence in order
to preserve all rights of its creditors and all liens upon its property. If at
any time the Surviving Corporation shall deem or be advised that any further
assignments, assurances in law, or other acts or instruments are necessary or
desirable to vest or confirm in it the title to any property of Aetna, Aetna and
its officers and directors will do all such acts and things as may be necessary
or useful to vest or confirm title to such property in the Surviving Corporation
and otherwise to carry out the purpose of this Agreement.

                                   Article VI

         For the convenience of the parties and to facilitate the filing of this
Agreement, any number of counterparts hereof may be executed, and each such
counterpart shall be deemed to be an original instrument.

         IN WITNESS WHEREOF, each of the Constituent Corporations has caused
this Agreement to be executed by its Chairman of the Board or President. The
directors, or a majority thereof, of such Constituent Corporation have hereunto
signed their names, and such Constituent Corporation has caused its corporate
seal to be hereunto affixed and attested.

Dated:  August 22, 1968

                                       Aetna Leather Novelty Co., Inc.

                                       By: /s/ MARTIN GINSBURG
                                           -------------------------------------
                                           Martin Ginsburg, President

Attest:

/s/ ABE GINSBURG
-----------------------------
Abe Ginsburg, Secretary
                                       Directors of Aetna Leather
                                       Novelty Co., Inc.

                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg


                                       /s/ MARTIN GINSBURG
                                       -----------------------------------------
                                       Martin Ginsburg


                                       /s/ ALEX CHESTNOV
                                       -----------------------------------------
                                       Alex Chestnov
<PAGE>

                                       Jaclyn, Inc.

                                       By: /s/ ABE GINSBURG
                                           -------------------------------------
                                           Abe Ginsburg, Chairman of the
                                           Board


Attest:

/s/ ALEX CHESTNOV
-----------------------------
Alex Chestnov, Secretary


                                       Directors of Jaclyn, Inc.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg


                                       /s/ MARTIN GINSBURG
                                       -----------------------------------------
                                       Martin Ginsburg


                                       /s/ WALTER GAILING
                                       -----------------------------------------
                                       Walter Gailing


                                       /s/ ALLAN GINSBURG
                                       -----------------------------------------
                                       Allan Ginsburg
<PAGE>

                          CERTIFICATE OF THE SECRETARY
                                       OF
                         AETNA LEATHER NOVELTY CO., INC.

                        RELATIVE TO VOTE OF STOCKHOLDERS

         I, Abe Ginsburg, Secretary of Aetna Leather Novelty Co., Inc., a
corporation organized and existing under the laws of the State of New Jersey, do
hereby certify, in accordance with the provisions of Section 14:12-3 of the
Revised Statues of New Jersey and of Section 252 of the General Corporation Law
of the State of Delaware:

         1.       That the foregoing Agreement of Merger entered into by and
between Aetna Leather Novelty Co., Inc. and Jaclyn, Inc. was authorized at a
duly constituted meeting of the Board of Directors of Aetna Leather Novelty Co.,
Inc., at which a quorum was present and acting throughout, and signed by all or
a majority of the directors of Aetna Leather Novelty Co., Inc. under the
corporate seal thereof.

         2.       That all of the stockholders of Aetna Leather Novelty Co.,
Inc. dispensed with a meeting and vote of stockholders, and all of said
stockholders consented in writing to the adoption of the foregoing Agreement of
Merger under the authority of, and in accordance with, Sections 14:10-3 and
14:10-9.1 of the Revised Statutes of New Jersey and Section 228 of the General
Corporation Law of the State of Delaware.

         3.       That the principal office of Aetna Leather Novelty Co., Inc.
in the State of New Jersey is located at 635 59th Street, West New York, Hudson
County, and the agent therein and in charge thereof upon whom process against
said corporation may be served, is Alex Chestnov; and that said corporation has
no office in the State of Delaware.

         IN WITNESS WHEREOF, I have hereunto signed my name as Secretary and
affixed the corporate seal this 22 day of August, 1968.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Secretary
<PAGE>

STATE OF NEW JERSEY  )
                     ) SS.:
COUNTY OF HUDSON     )


         BE IT REMEMBERED that, on the date hereinafter set forth, personally
appeared before me, Abe Ginsburg, who, being by me duly sworn according to law,
does depose and say and make proof to my satisfaction;

         that he is the Secretary of Aetna Leather Novelty Co., Inc.

         that he signed the foregoing Agreement of Merger as a director of Aetna
Leather Novelty Co., Inc. and that he saw Martin Ginsburg, as President, and
Alex Chestnov, as director of Aetna Leather Novelty Co., Inc. sign said
Agreement of Merger and heard them declare that they signed the same as the
voluntary act and deed of said corporation;

         that he affixed the corporate seal to said Agreement of Merger and
attested thereto; and

         that he signed, under the corporate seal of said corporation, the
certificate attached to the foregoing Agreement of Merger, reciting the adoption
of the Agreement of Merger by the stockholders of said corporation.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg
                                       Secretary
Subscribed and sworn to
before me on August 22, 1969

-------------------------------
     Notary Public

<PAGE>

                       CERTIFICATE OF ASSISTANT SECRETARY
                                       OF
                                  JACLYN, INC.

                        RELATIVE TO VOTE OF STOCKHOLDERS

         I, Allan Ginsburg, Assistant Secretary of Jaclyn, Inc., a corporation
organized and existing under the laws of the State of Delaware, do hereby
certify, in accordance with the provisions of Section 252 of the General
Corporation Law of the State of Delaware and Section 14:12-3 of the Revised
Statutes of New Jersey:

         1.       That the foregoing Agreement of Merger entered into by and
between Aetna Leather Novelty Co., Inc. and Jaclyn, Inc. was authorized by a
written consent of all the directors of Jaclyn, Inc. under the authority of, and
in accordance with, Section 228 of the General Corporation Law of the State of
Delaware, and signed by al or a majority of the directors of Jaclyn, Inc., under
the corporate seal thereof.

         2.       That all of the stockholders of Jaclyn, Inc., dispensed with a
meeting and vote of stockholders, and all of said stockholders consented in
writing to the adoption of the foregoing Agreement of Merger under the authority
of, and in accordance with, Section 228 of the General Corporation Law of the
State of Delaware and Section 14:10-3 and 14:10-9.1 of the Revised Statutes of
New Jersey.

         3.       That the principal office of Jaclyn, Inc. in the State of
Delaware is located at 229 South State Street, Dover, Delaware, and the agent
therein and in charge thereof, upon who process against said corporation may be
served, is The Prentice-Hall Corporation System, Inc.; and that the principal
office of said corporation in the State of New Jersey is located at 635 59th
Street, in the City of West New York, County of Hudson and the agent therein and
in charge thereof, upon who process against said corporation may be served, is
Alex Chestnov.

         IN WITNESS WHEREOF, I have hereunto signed my name as Secretary and
affixed the corporate seal this 22 day of August, 1968.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Secretary
<PAGE>

STATE OF NEW JERSEY )
                    ) SS:
COUNTY OF HUDSON    )

         BE IT REMEMBERED that, on the date hereinafter set forth personally
appeared before me, Allan Ginsburg, who, being by me duly sworn according to
law, does depose and say and make proof to my satisfaction;

         that he is an Assistant Secretary of Jaclyn, Inc.,;

         that he signed the foregoing Agreement of Merger as a director of
Jaclyn, Inc., and that he saw Abe Ginsburg, as Chairman of the Board, and Martin
Ginsburg and Walter Gailing, as directors of Jaclyn Inc. sign said Agreement of
Merger and heard them declare that they signed the same as the voluntary act and
deed of said corporation;

         that he affixed the corporate seal to said Agreement of Merger and
attested thereto; and

         that he signed, under the corporate seal of said corporation, the
certificate attached to the foregoing Agreement of Merger, reciting the adoption
of the Agreement of Merger by the stockholders of said corporation.


                                       /s/ ALLAN GINSBURG
                                       -----------------------------------------
                                       Allan Ginsburg
                                       Secretary
Subscribed and sworn to
before me on August 22, 1968

------------------------------
     Notary Public
<PAGE>

         The foregoing Agreement of Merger having been duly adopted by the
stockholders of each of the corporations parties thereto, and the fact of such
adoption thereof having been duly certificated by the secretary or an assistant
Secretary of each of said corporations, all in accordance with law, said
Agreement of Merger is hereby signed by the president or chairman of the board
and secretary or assistant secretary of each of said corporations under the
respective corporate seals thereof this 22 days of August, 1968.


                                       /s/ MARTIN GINSBURG
                                       -----------------------------------------
                                       Martin Ginsburg, President of
                                       Aetna Leather Novelty Co., Inc.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg, Secretary of
                                       Aetna Leather Novelty Co., Inc.


                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg, Chairman of the
                                       Board of Jaclyn, Inc.


                                       /s/ ALLAN GINSBURG
                                       -----------------------------------------
                                       Allan Ginsburg, Assistant
                                       Secretary of Jaclyn, Inc.

<PAGE>

                           ACKNOWLEDGMENT OF PRESIDENT
                                       OF
                         AETNA LEATHER NOVELTY CO., INC.
                           (A New Jersey corporation)

STATE OF NEW JERSEY )
                    ) ss.:
COUNTY OF HUDSON    )

         The undersigned, a notary public in and for said county and state as
aforesaid does hereby certify that Martin Ginsburg, President of Aetna Leather
Novelty Co., Inc., a New Jersey corporation, who is personally known to me to be
the person whose name is subscribed to the foregoing Agreement of Merger as such
President, and who is personally known to me to be the President of said
corporation, appeared before me this day in person and acknowledged that he
signed, sealed and delivered said Agreement as his free and voluntary act as
such President, and as the free and voluntary act, deed and agreement of said
corporation for the uses and purposes therein set forth; and further
acknowledged said Agreement to be the act, deed and agreement of said
corporation, and that the signature of said President and of the Secretary of
said corporation to said foregoing instrument are in the handwriting of the said
President and of the said Secretary of said corporation, respectively, and that
the seal affixed to said instrument is the common or corporate seal of said
corporation and that the act of sealing, executing, acknowledge and delivery the
said instrument was duly authorized by the Board of Directors of said
corporation.

         Given under my hand and notarial seal this 22nd day of August, 1968.


                                       -----------------------------------------
                                       Notary Public

<PAGE>

                     ACKNOWLEDGMENT OF CHAIRMAN OF THE BOARD
                                       OF
                                  JACLYN, INC.
                            (A Delaware corporation)

STATE OF NEW JERSEY )
                    ) ss.:
COUNTY OF HUDSON    )

         The undersigned, a notary public in and for said county and state as
aforesaid does hereby certify that Abe Ginsburg, Chairman of the Board of
Jaclyn, Inc., a Delaware corporation, who is personally known to me to be the
person whose name is subscribed to the foregoing Agreement of Merger as such
Chairman of the Board, and who is personally known to me to be the Chairman of
the Board of said corporation, appeared before me this day in person and
acknowledged that he signed, sealed and delivered said Agreement as his free and
voluntary act as such Chairman of the Board, and as the free and voluntary act,
deed and agreement of said corporation for the uses and purposes therein set
forth; and further acknowledged said Agreement to be the act, deed and agreement
of said corporation, and that the signature of said Chairman of the Board and of
an Assistant Secretary of said corporation to said foregoing instrument are in
the handwriting of the said Chairman of the Board and of the said Assistant
Secretary of said corporation, respectively, and that the seal affixed to said
instrument is the common or corporate seal of said corporation and that the act
of sealing, executing, acknowledge and delivery the said instrument was duly
authorized by the Board of Directors of said corporation.

         Given under my hand and notarial seal this 22nd day of August, 1968.


                                       -----------------------------------------
                                       Notary Public

<PAGE>

                            CERTIFICATE OF AMENDMENT

                                     OF THE

                          CERTIFICATE OF INCORPORATION

                                       OF

                                  JACLYN, INC.

                              *********************


                         JACLYN, INC., a corporation organized and existed
            under and by virtue of the General Corporation Law of the State
            of Delaware, DOES HEREBY CERTIFY:

                         FIRST: That at a meeting of the Board of Directors
            of Jaclyn, Inc, (the "Corporation"), resolutions were duly
            adopted setting forth a proposed amendment to the Certificate
            of Incorporation of said Corporation, declaring said
            amendment to be advisable and calling a meeting of the
            stockholders of said Corporation for consideration thereof. The
            resolution setting forth the proposed amendment to the
            Certificate of Incorporation is as follows:

                                RESOLVED, that the introductory language to
                         Article "FOURTH" be amended to read as follow:

                                "FOURTH: The total number of shares of all
                         classes of stock which the corporation shall have
                         authority to issue is Six Million (6,000,000)
                         shares, consisting of

                         (a)    One million (1,000,000) shares of Preferred
            Stock of the par value of $1 per share (hereinafter) referred
            to as "Preferred Stock"); and

                         (b)    Five Million (5,000,000) shares of Common
            Stock of the par value of $1 per share (hereinafter referred to
            as "Common Stock").

                         SECOND: That thereafter, pursuant to resolution of
            its Board of Directors, an annual meeting of the stockholders
            of said Corporation was duly called and held, upon notice in
            accordance with Section 222 of the General Corporation Law of
            the State of Delaware, at which meeting the necessary number of
            shares as required by statute were voted in favor of the
            amendment.
<PAGE>

                         THIRD: That said amendment was duly adopted in
            accordance with the provisions of Section 242 of the General
            Corporation Law of the state of Delaware.

                         IN WITNESS WHEREOF, said Jaclyn, Inc. has caused
            this certificate to be signed by Abe Ginsburg, it's Chairman of
            the Board of Directors, and attested by Walter Gailing, it's
            Secretary-Treasurer, this 11th day of December, 1984.


                                       JACLYN INC.


                                       BY: /s/ ABE GINSBURG
                                           ---------------------------------
                                           Chairman of the Board of Directors

           ATTEST:

           By: /s/ WALTER GAILING
               ------------------------
               Secretary-Treasurer
<PAGE>

                               ACKNOWLEDGMENT
                               --------------


STATE OF NEW JERSEY  )
                     )  SS:
COUNTY OF HUDSON     )


         BE IT REMEMBERED, that on this 11th day of December, 1984,
personally before me, a Notary Public in and for the County and state
aforesaid, ABE GINSBURG, Chairman of the Board of Jaclyn, Inc. Inc., a
corporation of the State of Delaware, the corporation described in and
which executed the foregoing Certificate of Amendment. known to me
personally to be such and he duly executed said Certificate of Amendment
before me and acknowledged the said Certificate of Amendment to be the act
and deed of said corporation and that the facts stated therein are true.

         IN WITNESS WHEREOF, I have hereunto set my hand and seal of office
the day and year aforesaid.


                                       /s/ VIRGINIA PIACENTINI
                                       -------------------------------------
                                       Notary Public

<PAGE>

                          CERTIFICATE OF AMENDMENT
                                     OF
                        CERTIFICATE OF INCORPORATION
                                     OF
                                JACLYN, INC.

         It is hereby certified that:

         1.       The name of the corporation (hereinafter called the
"corporation") is Jaclyn, Inc.

         2.       The Certificate of Incorporation of the Corporation is hereby
amended by adding the following new Article ELEVENTH:

                  "ELEVENTH: No director of the Corporation shall be
         liable to the Corporation or its stockholders for monetary
         damages for breach of fiduciary duty as a director, except
         that this Article ELEVENTH, to the extent required by
         applicable Law, foes not eliminate or limit the liability of
         the director (i) for any breach of the director's duty of
         loyalty to the Corporation or it's stockholders, (ii) for
         acts or omissions not in good faith or which involve
         intentional misconduct or a knowing violation of law, (iii)
         under Section 174 of the Delaware General Corpooration Law,
         or (iv) for any transaction from which the director derived
         an improper personal benefit. Neither the amendment nor
         repeal of this Article ELEVENTH, nor the adoption of any
         prevision of this Certificate of Incorporation inconsistent
         with this Article ELEVENTH in respect of any matter occur-
         ring, or any cause of action, suit or claim that, but for
         this Article ELEVENTH, would accrue or arise prior to such
         amendment, repeal or adoption of an inconsistent
         provision."

         3.       The amendment of the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware.

Signed and attested to on December 2, 1986.

                                       /s/ ABE GINSBURG
                                       -----------------------------------------
                                       Abe Ginsburg
                                       Chairman of the Board

Attest:

/s/ VIRGINIA PIACENTINI
------------------------------
Virginia Piacentini
<PAGE>

                    CERTIFICATE OF OWNERSHIP AND MERGER
                                     OF
                            BONNIE INTERNATIONAL
                         EMPRESS HANDBAG CO., INC.
                          ROBYN-LYN CREATIONS INC.
                       COSMOPOLITAN HANDBAG CO., INC.
                         (New Jersey Corporations)

                                    into

                                JACLYN, INC.
                          (a Delaware Corporation)

It is hereby certified that:

         1.       Jaclyn, Inc. (hereinafter sometimes referred to as the
"Corporation") is a business corporation of the State of Delaware.

         2.       The Corporation is the owner of all of the outstanding
shares of stock of Bonnie International ("Bonnie") Empress Handbag co.,
Inc. ("Empress"), Robyn-Lyn Creations Inc. ("Robyn Lyn") and Cosmopolitan
Handbag Co., Inc. ("Cosmopolitan"), which are business corporations of
the State of New Jersey.

         3.       The laws of the jurisdiction of organization of Bonnie,
Empress, Robyn Lyn and Cosmopolitan permit the merger of a business
corporation of that jurisdiction with a business corporation of another
jurisdiction.

         4.       The Corporation here hereby merges Bonnie, Empress, Robyn
Lyn and Cosmopolitan into the Corporation.

         5.       The following is a copy of the resolutions adopted on May
24, 1994 by the Board of Directors of the corporation to merge said
Bonnie, Empress, Robyn Lyn and Cosmopolitan into the Corporation:

                           RESOLVED, that Bonnie International
                  ("Bonnie"), Empress Handbag Co., Inc. ("Empress"),
                  Robyn-Lyn Creations Inc. co., Inc. ("Cosmopolitan")
                  be merged into this Corporation, and that all of the

<PAGE>

                  estate, property, rights, privileges, powers, and
                  franchises of Bonnie, Empress, Robyn Lyn and
                  Cosmopolitan vested in and held and enjoyed by this
                  Corporation as fully and entirely and without change
                  or diminution as the same were before held and
                  enjoyed by each of Bonnie, Empress, Robyn Lyn and
                  Cosmopolitan.

                           RESOLVED, that this Corporation assume all
                  of the obligations of Bonnie, Empress, Robyn Lyn and
                  Cosmopolitan.

                           RESOLVED, that this Corporation shall cause
                  to be executed and filed and/or recorded the
                  documents prescribed by the laws of the State of
                  Delaware, by the laws of the State of New Jersey and
                  by the laws of any other appropriate jurisdiction of
                  organization of Bonnie, Empress, Robyn Lyn and
                  Cosmopolitan and of this Corporation and in any
                  other appropriate jurisdiction.

                           RESOLVED, that the effective time of the
                  Certificate of Ownership and Merger setting forth a
                  copy of these resolutions shall be June 30, 1994, at
                  11:59 P.M., and that, insofar as the General
                  Corporation Law of the State of Delaware shall
                  govern the same, said time shall be the effective
                  merger time.


Executed on June 16, 1994
                                       JACLYN, INC.


                                       By: /s/ ROBERT CHESTNOV
                                           ---------------------------------
                                           Robert Chestnov, President
Attest:

/s/ MURRAY RICHMAN
------------------------------
Murray Richman, Secretary
<PAGE>

                  CERTIFICATE OF OWNERSHIP AND MERGER

                                  OF

                        INVESTMENTS (JLN) LTD.

                                 INTO

                             JACLYN, INC.
                (Pursuant to Section 253 of the General
                     Corporation Law of Delaware)

         Jaclyn, Inc., ad Delaware corporation (hereinafter, the "Corporation"),
does hereby certify that:

         1.       The Corporation is a business corporation of the State of
                  Delaware.

         2.       The Corporation is the owner of all of the outstanding shares
                  of capital stock of Investments (JLN) Ltd. (the "Subsidiary"),
                  which is also a business corporation of the State of Delaware.

         3.       On June 14, 2005, the Board of Directors of the Corporation
                  adopted the Following resolutions to merge the Subsidiary with
                  and into the Corporation:

                           RESOLVED, that Investments (JLN) Ltd., the
                  Corporation's wholly-owned subsidiary (the "Subsidiary"), be
                  merged with and into the Corporation, and that all of the
                  estate, property, rights, privileges, powers, and franchises
                  of the Subsidiary be vested in and held and enjoyed by the
                  Corporation as fully and entirely and without change or
                  diminution as the same were held and enjoyed by the Subsidiary
                  in its name, and it is further

                           RESOLVED, upon the effectiveness of the merger of the
                  Subsidiary with and into the Corporation, the Corporation
                  shall assume all of the liabilities and obligations of the
                  Subsidiary, and the Subsidiary shall cease to exist as a
                  separate entity; and it is further

                           RESOLVED, that the directors, officers, certificate
                  of incorporation and by-laws of the Corporation existing
                  immediately prior to the merger of the subsidiary with and
                  into the Corporation shall continue in effect after said
                  merger, and all of the shares of capital stock issued by the
                  Subsidiary and outstanding immediately prior to said merger
<PAGE>

                  shall be terminated and cancelled by virtue of said merger;
                  and it is further

                           RESOLVED, that the officers of the Corporation, and
                  each of them, are hereby authorized, empowered and directed,
                  in the name and on behalf of the Corporation, to execute and
                  deliver for filing with the Secretary of State of the State of
                  Delaware a Certificate of Ownership and Merger setting forth a
                  copy of these resolutions and containing such other items and
                  matters as may be prescribed by the laws of the State of
                  Delaware, and to execute, file and/or record such other
                  certificates. Documents and instruments, and to take all such
                  other and further action, as my be necessary or appropriate to
                  effect the merger of the Subsidiary with and into the
                  Corporation or to otherwise carry our the purpose and intent
                  of these resolutions, the execution, delivery, filing and/or
                  recording of same, or the taking of such action, to be
                  conclusive evidence of the approval thereof.


Executed on June 27, 2005              JACLYN, INC.

                                       By: /s/ ANTHONY CHRISTON
                                           -------------------------------------
                                           Anthony Christon, Vice President
                                           and Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>ex_4d.txt
<DESCRIPTION>EXHIBIT 4(D)
<TEXT>
                                                                    EXHIBIT 4(d)

                FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT,
                  PROMISSORY NOTE AND OTHER LOAN DOCUMENTS


         AGREEMENT, made this 23rd day of October 2003 between JACLYN, INC.
("Borrower"), a corporation organized and existing pursuant to the laws of the
State of Delaware, having an address at 635 59th Street, West New York, New
Jersey 07093 (hereinafter referred to as, "Borrower") and HUDSON UNITED BANK, a
New Jersey corporation, (hereinafter referred to as, "Bank"), located at 1000
MacArthur Boulevard, Mahwah, New Jersey 07430.


                            W I T N E S S E T H:

         WHEREAS:

         A.       Borrower entered into a revolving loan agreement with Bank on
December 23, 2002 (the "Loan Agreement") and pursuant to such Loan Agreement,
Borrower executed and delivered to Bank its promissory note in the original
principal amount of THIRTY-TWO MILLION AND 00/100 (32,000,000.00) DOLLARS dated
December 23, 2002 (the "Revolving Note");

         B.       Borrower has now requested that Bank increase the amount of
funds available under the Revolving Loan from "THIRTY-TWO MILLION AND 00/100
(32,000,000.00) DOLLARS" to "FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS,"
extend the maturity date of the Revolving Loan and Revolving Note from "December
1, 2004" to "December 1, 2005," increase the amount of the direct debt sub-limit
under the Revolving Loan from "$22,000,000.00" to "$25,000,000.00," increase the
over-advance limit from "$5,000,000.00" to "$8,000,000.00" for the period July
31st through November 30th and make certain other modifications and changes to
the Loan Agreement; and

         C.       Bank has agreed to increase the amount of funds available
under the Revolving Loan from "THIRTY-TWO MILLION AND 00/100 (32,000,000.00)
DOLLARS" to "FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS," to extend the
maturity date of the Revolving Loan and Revolving Note from "December 1, 2004"
to "December 1, 2005," to increase the amount of the direct debt sub-limit under
the Revolving Loan from "$22,000,000.00" to "$25,000,000.00," to increase the
over-advance limit from "$5,000,000.00" to "$8,000,000.00" for the period July
31st through November 30th and to make certain other modifications and changes
to the Loan Agreement strictly in accordance with the terms and conditions of
this Agreement.

                  NOW THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned hereto agree as follows:

                  1.       In connection with Bank's agreement to increase the
amount of funds available under the Revolving Loan, Borrower has this date
executed and delivered to Bank its promissory note in the original principal
amount of FORTY MILLION AND 00/100 (40,000,000.00) DOLLARS in the form attached
hereto as Schedule A (hereinafter, the "Restated Secured Revolving Note") which
note shall replace and supersede, but shall not be considered a repayment of,
the Revolving Note. Any and all interest due and owing under the Revolving Note
and any further amounts evidenced by the Revolving Note shall hereafter be
evidenced by the Restated Secured Revolving Note and any unpaid interest under
the under the Revolving Note shall be payable on the first payment date on the
Restated Secured Revolving Note.

                                     1
<PAGE>

                  2.       Paragraph 1.47 of the Loan Agreement is amended to
read as follows:

                           "1.47. "Termination Date" shall mean the earlier of
December 1, 2005, or the date on which Lender terminates this Agreement pursuant
to Section 12.1 of this Agreement."

                  3.       Paragraph 2.1 of the Loan Agreement is amended to
read as follows:

                           "2.1. Advances. Subject to the terms and conditions
of this Agreement including, without limitation, the Maximum Facility and
relying upon the representations and warranties set forth in this Agreement, for
so long as no Default or Event of Default shall have occurred and shall be
continuing, Lender shall make Advances to Borrower on its request, from time to
time during the term of this Agreement in an amount ("Borrowing Capacity") not
to exceed at any one time outstanding the lesser of:

                           (a)      TWENTY-FIVE MILLION and 00/100
(25,000,000.00) Dollars, or

                           (b)      the sum of (i) eighty-five (85) percent of
the face amount of Borrower's Eligible Receivables, (ii) fifty (50) percent of
the Value of Borrower's Eligible Inventory, and (iii) fifty (50) percent of the
outstanding face amount of Letters of Credit issued under this Agreement, plus
in each case, for the period from July 31st through November 30th only,
$8,000,000.00 provided an officer of Borrower submits to Lender an Authenticated
Record within twenty (20) days of the end of July, August, September, October
and November stating that sixty-five (65) percent of the value of all Eligible
Inventory is subject to confirmed bona fide purchase orders with unrelated third
parties. Value shall mean the lower of cost or the fair market value of such
Inventory, as reflected on the books and records of Borrower.

                  For the purpose of calculating the Borrowing Capacity under
Subsection 2.1(b), the face of all Letters of Credit shall be deducted from such
sum. Within the limits of the Borrowing Capacity, and subject to the limitations
set forth in this Agreement, Borrower may borrow, repay and reborrow Advances."

                  4.       The undersigned Borrower and Guarantors acknowledge
and agree that the term "Obligation" or "Obligations," as defined in the Loan
Agreement, shall include the Restated Secured Revolving Note referred to in this
Agreement

                  5.       Any reference in any document executed and/or
delivered in connection with the Loan Agreement to the "Agreement" or the "Loan
Agreement" shall mean the revolving loan agreement dated December 23, 2002 as
amended by this Agreement. Any reference in any document executed and/or
delivered in connection with the Loan Agreement to the Revolving Note shall mean
the note attached hereto as Schedule A. All of the provisions of the Restated
Secured Revolving Note, the Loan Agreement or any other document executed or
delivered in connection with the Loan Agreement (collectively, the "Loan
Documents") are amended so that such terms shall be consistent with the
provisions of this Agreement. Notwithstanding the foregoing, and to the extent
that there is any inconsistency between the provisions of those agreements and
this Agreement, the provisions of this Agreement shall govern.

                                     2
<PAGE>

                  6.       Bank's agreement to increase the amount of funds
available under the Revolving Loan, to extend the maturity date of the Revolving
Loan and Revolving Note from "December 1, 2004" to "December 1, 2005," to
increase the amount of the direct debt sub-limit under the Revolving Loan from
$22,000,000.00 to $25,000,000.00, to increase the over-advance limit from
"$5,000,000.00" to "$8,000,000.00" for the period July 31st through November
30th and to otherwise modify the Loan Agreement and the other Loan Documents is
not and shall not be construed as a waiver of any current or future default
under the Revolving Note, the Restated Secured Revolving Note, the Loan
Agreement or any other Loan Document nor shall it preclude Bank from proceeding
against Borrower on any such default. This Agreement is also not a
relinquishment of any rights or remedies Bank may have in connection with the
Revolving Note, the Restated Secured Revolving Note, the Loan Agreement or any
other Loan Document.

                  7.       As a material condition to the entering into of this
Agreement, Borrower and the undersigned Guarantors by executing this Agreement
voluntarily and expressly waive any and all rights to assert a claim,
counterclaim or defense which now exists of which they have actual knowledge
against Bank arising out of or in any way connected with the Restated Secured
Revolving Note, the Loan Agreement or any other Loan Document. The foregoing
waiver shall apply to any action instituted by any of the undersigned and to any
action or proceeding brought against any of the undersigned by Bank. The term
"actual knowledge" means the conscious awareness of those officers of Borrower
and the undersigned guarantors who have given substantive attention to this
Agreement, of facts or information relating to such a claim, counterclaim or
defense, without undertaking any investigation to determine the existence or
absence of any such facts or information, either within Borrower or any of the
undersigned guarantors or otherwise.

                  8.       Borrower and the guarantors by executing this
Agreement acknowledge that there is due and owing on the Restated Secured
Revolving Note the principal sum of $17,700,000.

                  9.       BORROWER AND THE GUARANTORS BY EXECUTING THIS
AGREEMENT ACKNOWLEDGE THAT HE, SHE OR IT HAS HAD A FULL AND FAIR OPPORTUNITY TO
REVIEW THIS AGREEMENT AND THE DOCUMENTS REFERRED TO HEREIN WITH COUNSEL OF HIS,
HER OR ITS CHOICE AND THAT HE, SHE OR IT HAS BEEN ADVISED AS TO THEIR TERMS AND
CONDITIONS, WHICH ARE ACCEPTABLE TO HIM, HER OR IT. FURTHER, EACH CONFIRMS THAT
IN DELIVERING THIS AGREEMENT TO BANK, HE, SHE OR IT IS NOT RELYING ON ANY
PROMISE, COMMITMENT, REPRESENTATION OR UNDERSTANDING, EITHER EXPRESS OR IMPLIED,
MADE BY OR ON BEHALF OF BANK THAT IS NOT EXPRESSLY SET FORTH HEREIN, OR IN THE
LOAN AGREEMENT, THE REVOLVING NOTE, THE RESTATED SECURED REVOLVING NOTE OR ANY
OTHER LOAN DOCUMENT. BORROWER AND THE GUARANTORS BY EXECUTING THIS AGREEMENT AND
THE RESTATED SECURED REVOLVING NOTE ACKNOWLEDGE AND UNDERSTAND THAT ALL
OBLIGATIONS UNDER THE RESTATED SECURED REVOLVING NOTE ARE DUE AND PAYABLE IN
ACCORDANCE WITH THE LOAN AGREEMENT AS AMENDED BY THIS AGREEMENT, UNLESS BANK IN
ITS SOLE AND ABSOLUTE DISCRETION EXTENDS THE MATURITY DATE OF SUCH OBLIGATION
AND THAT BANK HAS NOT MADE ANY REPRESENTATION THAT IT WILL EXTEND THE MATURITY
DATE OF SUCH OBLIGATION.

                  10.      This document may be executed in one or more
counterparts and all such documents taken together shall be considered one
original document.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized on the day
and year first above written

                                     3
<PAGE>

WITNESS:                            JACLYN, INC.




/s/ DAVID S. YANAGISAWA             by: /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer &
                                                 Treasurer



WITNESS:                            HUDSON UNITED BANK


                                    by  /s/ DAVID S. YANAGISAWA
--------------------------------        -------------------------------------
                                        David S. Yanagisawa
                                        Senior Vice President


         For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the undersigned guarantors of the performance and payment
of Borrower, do hereby approve all of the terms and conditions of this
Agreement, do hereby approve the execution and delivery of this Agreement by
Jaclyn, Inc., do hereby acknowledge and confirm their continuing liability and
responsibility to Hudson United Bank with respect to the debts referred to in
this Agreement and the Loan Agreement including, without limitation, the
Restated Secured Revolving Note.

WITNESS:                            Bonnie International
                                    (Hong Kong) Limited


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

WITNESS:                            JLN, Inc.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

WITNESS:                            Josell Global Sourcing Ltd.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

                                     4
<PAGE>

WITNESS:                            Investments (JLN) Ltd.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

WITNESS:                            Max N. Nitzberg, Inc.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

                      [Signatures continue next page]


WITNESS:                            Topsville, Inc.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

WITNESS:                            The Bag Factory Inc.


                                    by  /s/ ANTHONY C. CHRISTON
--------------------------------        -------------------------------------
                                        Name: Anthony C. Christon
                                        Title: Chief Financial Officer

                                     5
<PAGE>

                      RESTATED SECURED REVOLVING NOTE
                      -------------------------------


$40,000,000.00                                         Mahwah, New Jersey
                                                       October 23, 2003


                  FOR VALUE RECEIVED, JACLYN, INC., a corporation having an
address at 635 59th Street, West New York, New Jersey 07093 ("Borrower"),
promises to pay to the order of HUDSON UNITED BANK ("Lender"), at 1000 MacArthur
Boulevard, Mahwah, New Jersey 07430 or at such other place as Lender may from
time to time in writing designate, the principal sum of each Advance made by
Lender to Borrower under that certain revolving loan agreement dated December
23, 2002 between Borrower and Lender as it may be subsequently amended and/or
modified (collectively, the "Loan Agreement") (the Loan Agreement together with
all of the other documents, instruments or agreements executed in connection
therewith, as the same may be modified, amended, restated or replaced from time
to time are hereinafter collectively referred to as, the "Loan Documents"). The
aggregate unpaid principal balance hereof shall not exceed at any time the sum
of FORTY MILLION and 00/100 (40,000,000.00) DOLLARS. Capitalized terms used
herein and not otherwise defined shall have the meaning given such terms in the
Loan Documents. The entire unpaid principal balance hereof, together with the
accrued interest thereon and accrued late charges, if any, and all other sums
due hereunder and under the Loan Documents shall be due and payable on the
Termination Date.

                  Borrower also promises to pay interest to Lender monthly, in
arrears, on the first day of each month commencing on January 1, 2003 on the
average daily unpaid principal balance of this Note at the rate set forth in
Section 3.1 of the Loan Agreement.

                  This is the "Revolving Note" referred to in the Loan Agreement
and is entitled to the benefit of all of the terms and conditions and the
security of all of the security interests and liens granted by Borrower or any
other person to Lender pursuant to the Loan Agreement or any other Loan
Document. Upon the occurrence and during the continuance of any Event of
Default, the entire unpaid principal amount owed Lender hereunder shall, at the
option of Lender, become immediately due and payable without further notice or
demand, all as provided in the Loan Agreement.

                  This Note replaces and supersedes (but shall not be considered
a repayment of) a note of the Obligor dated December 23, 2002 in the original
principal amount of $32,000,000.00 (the "Prior Note"). Any and all amounts
evidenced by the Prior Note shall hereafter be evidenced by this Note and any
accrued but unpaid interest due and owing under the Prior Note shall be payable
on the first interest payment date hereunder.

                  Whenever any payment to be made under this Note shall be
stated to be due on a day other than a Banking Day, such payment shall be made
on the next succeeding Banking Day and such extension of time shall be included
in the computation of any interest then due and payable hereunder.

                  The undersigned and all other parties who, at any time, may be
liable hereon in any capacity waive presentment, demand for payment, protest and
notice of dishonor of this Note. This Note and any provision hereof may not be
waived, modified, amended or discharged orally, but only by an agreement in
writing which is signed by the holder and the party or parties against whom
enforcement of any waiver, change, modification, amendment or discharge is
sought.

                                       6
<PAGE>

                  This Note shall be governed by and construed under the
internal laws of the State of New Jersey, as the same may from time to time be
in effect, without regard to principles of conflicts of laws thereof.

                  IN WITNESS WHEREOF, the undersigned has executed this Note the
day and year first above written.

WITNESS:                            JACLYN, INC.


/s/ DAVID S. YANAGISAWA             by /s/ ANTHONY C. CHRISTON
-------------------------------        ------------------------------------
                                       Name: Anthony C. Christon
                                       Title: Chief Financial Officer &
                                                 Treasurer

                                       7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>ex_21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
                                                                      Exhibit 21
                                                                      ----------


                         Subsidiaries of the Registrant
                         ------------------------------

                                                            Percentage of Voting
                                       Jurisdiction of        Securities Owned
Name                                   Incorporation          by the Registrant
----                                   -------------          -----------------

Bonnie International (Hong
 Kong) Limited                         Hong Kong                     100%

JLN, Inc.                              Delaware                      100%

The Bag Factory Inc.                   New Jersey                    100%

Max N. Nitzberg, Inc.                  Pennsylvania                  100%

Topsville, Inc.                        Florida                       100%(1)

-----------------------
(1)   Owned 100% by Max N. Nitzberg, Inc., which is a wholly-owned direct
subsidiary of the Registrant.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.A
<SEQUENCE>5
<FILENAME>ex31_a.txt
<DESCRIPTION>EXHIBIT 31(A)
<TEXT>
                                                                   Exhibit 31(a)

                                  CERTIFICATION

I, Robert Chestnov, certify that:

1.       I have reviewed this Annual Report on Form 10-K of Jaclyn, Inc.;

2.       Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report

4.       The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5.       The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):

         (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: September 27, 2005            /s/ ROBERT CHESTNOV
                                    --------------------------------------------
                                    Robert Chestnov, Principal Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.B
<SEQUENCE>6
<FILENAME>ex31_b.txt
<DESCRIPTION>EXHIBIT 31(B)
<TEXT>
                                                                   Exhibit 31(b)
                                  CERTIFICATION

I, Anthony Christon, certify that:

1.       I have reviewed this Annual Report on Form 10-K of Jaclyn, Inc.;

2.       Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.       The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5.       The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):

         (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: September 27, 2005           /s/ ANTHONY CHRISTON
                                   ---------------------------------------------
                                   Anthony Christon, Principal Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>ex_32.txt
<DESCRIPTION>EXHIBIT 32
<TEXT>
                                                                      Exhibit 32

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


         In connection with the Annual Report on Form 10-K of Jaclyn, Inc. (the
"Company") for the fiscal year ended June 30, 2005 (the "Report"), the
undersigned each hereby certifies that: (1) the Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and (2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.



Dated: September 27, 2005           /s/ ROBERT CHESTNOV
                                    --------------------------------------
                                    Robert Chestnov, President
                                    (Chief Executive Officer)


Dated: September 27, 2005           /s/ ANTHONY CHRISTON
                                    --------------------------------------
                                    Anthony Christon,
                                    Chief Financial Officer

         A signed original of this written statement required by Section 906 has
been provided to Jaclyn, Inc. and will be retained by Jaclyn, Inc. and forwarded
to the Securities and Exchange Commission or its staff upon request.
</TEXT>
</DOCUMENT>
</SUBMISSION>
